Some of the biggest winners and losers on the UK Index this week can be derived from UK Prime Minister Theresa May and the Conservative Party Conference. Nothing to do with the P45 prank or uncontrollable coughing, rather her party pledge to help fight for consumers on two fronts: energy prices and the housing market.

Energy providers Centrica and SSE are at the tail end of the UK Index this week, down 6.5% and 1.87% respectively, for an index up 2.0%, and the British Gas owner coming off worse than the electricity supplier. The Conservative government has revived its election manifesto promise to cap energy prices for an extra 12m consumers with a safeguard tariff for those on expensive default standard variable tariffs (SVTs), although it wouldn’t kick in until 2018-19 and would be set and reviewed by OFGEM, another UK regulator that consumers claim lacks teeth.

The aim is to save the elderly, vulnerable, those on low incomes and renters an average £100 annually, protect customers and encouraging competition in what many claim is a broken market, dominated by the big six. Note the shares of France’s EDF, Germanys E.On and Innogy (Npower) and Spain’s Iberdrola (Scottish Power) also took a knock. Understandably so when you take into account the potential impact on their profitability and the potential for it to become permanent from 2020.

Remember last week I talked about highly indebted UK Index sectors at risk of a UK interest rate rise? One was utilities, already in a downtrend, meaning this week’s news merely added to a downtrend that saw the shares revisit 18-month (SSE) and 13.5yr lows, respectively, this week making SSE the UK Index ‘s worst performer of the 2017, -25%.

On a more positive note (for both investors and consumers),UK Index house-builder Barratt Development saw its shares put on a whopping 7.4% (conveniently offsetting the Centrica fall). This was thanks to the UK PM’s pledge to extend the 2013 Help-to-Buy mortgage-subsidy scheme to help those on the lower rungs of the UK property ladder gain access to the required funding (200,00 helped so far; 1 in 12 first time buyers).

Another £10bn pledge is a 50% increase on what the UK government has already spent. Good news for the UK property market, its house-builders and shareholders, keeping the music playing for a good few more years. Could this help one of the best performing sectors of the year keep rallying tp even higher highs?

Note Persimmon also rose 4.9% while Taylor Wimpey and Berkeley Group put on around 2%. On the , Bovis Homes fared almost as well as Barratts with a 6.3% advance while Bellway, Countryside Properties and Crest Nicholson all notched up respectable gains of 2-3%.

Two key sectors which can be influenced by politics and not just the bog standard quarterly results and macro data. The stuff we’re paid to listen out for to help you, the client.

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Have a nice weekend,

Mike van Dulken, Head of Research, 6 Oct 2017