Morning Note: Market news and Berkeley Group

Market News

Gold is trading above $2,990 per ounce, a record high and just shy of the $3,000 milestone, driven by risk aversion and rising expectations of Federal Reserve rate cuts. In the latest escalation of US President Donald Trump’s multi-front trade war, he warned of a 200% tariff on European wine and other alcoholic beverages after the EU imposed a 50% tax on American whiskey exports. Meanwhile, recent PPI and CPI data signalled easing price pressures in February, giving the Fed more room to cut rates and boosting the appeal of non-yielding gold. Further supporting the metal are strong ETF demand and sustained central bank buying, with China extending its purchases for a fourth consecutive month.

Canada’s industry minister said he expects Mark Carney to speak to Trump in coming days. Tesla warned that retaliatory moves might drive up costs and make its vehicles less competitive overseas.

US equities fell again last night – S&P 500 (-1.4%); Nasdaq (-2.0%) – and entered technical correction territory (i.e. a 10% fall from the peak in February). However, this morning Asian stocks and US and European equity-index futures rallied as signs the US will avoid a government shutdown boosted sentiment: Nikkei 225 (+0.7%); Hang Seng (+2.3%); Shanghai Composite (+1.8%). Markets were also helped by the prospect of further China policy support to boost consumption.

The FTSE 100 is currently 0.4% higher at 8,572. The UK economy shrank 0.1% in January in fresh setback for the government. Sterling trades at $1.2933 and €1.1925.

Source: Bloomberg

Company News

Berkeley Group has today released a brief trading update covering the period from 1 November 2024 to 28 February 2025 and reiterated its guidance for FY2025 and FY 2026. In response, the shares have been marked up by 2% in early trading and currently trade on 1.05x the October 2024 NTA (NAV) of £34.47.

Berkeley is a residential housing developer focused on London and South-East England, the country’s most under-supplied housing market, with a broad spread of developments ranging from traditional family homes in the countryside to city apartments and mixed-use schemes. The company delivers over 10% of the capital’s new private and affordable homes. The group’s strategy has been developed for a cyclical market, with a focus on financial discipline and adding value through its development expertise, especially in large-scale, complex sites. Around half of purchasers of Berkeley’s properties are from overseas.

Recognising the strong occupational and institutional investment demand for high quality, well-managed rental homes in London and the South-East, Berkeley is establishing its own Build to Rent (BTR) platform to maximise returns in today’s market conditions. The company has identified some 4,000 homes across 17 of its sustainable and well-connected brownfield regeneration sites as an initial portfolio for this platform.

Last December, the company set out its 10-year growth strategy – Berkeley 2035 – in which the focus will be on long-term value creation through a flexible capital allocation framework which balances near-term volatility in the operating environment with the ability to capitalise on emerging investment opportunities. The company has identified £7bn of its free cash flow to deploy over the next ten years in a combination of land investment, construction of its BTR platform, returns to shareholders.

The statement highlights that enquiries are at a consistently good level, with the modest improvement in sales reservations continuing, and sales rates ahead of those achieved last year. The company has reaffirmed its earnings guidance to deliver at least £975m of pre-tax profit across FY2025 (£525m) and FY2026 (£450m).

However, the company stresses that for this improvement to continue and sales rates to return closer to the levels of three years ago, there needs to be greater confidence in the trajectory of interest rate reductions and wider economic stability.

Berkeley has maintained its strong financial position, with net cash anticipated to be around £300m at 30 April 2025, up from £474m at the end of October. This reflects an acceleration of shareholder returns since the half-year through share buy-backs and the anticipated settlement of some £180m of land creditors in the second half of the year.

Since its interim results in December, Berkeley has returned £71.3m via share buybacks. Taking this and the interim dividend (£33m) into account, there is currently £156.1m residual shareholder return (to complete the £283.5m annual return) due by the end of September 2025. To the extent this amount is not delivered as share buybacks, it will be returned in September as a dividend.

In the statement, the group highlights its remains “hugely encouraged” by the change in mind-set over planning brought about by the Government’s planning reforms and housing delivery ambitions. Berkeley has made good progress during the period, securing important amendments on 10 of its long-term regeneration sites and is actively appraising a number of opportunities in the land market.

Source: Bloomberg