FTSE 100 Live: Housebuilders Rally as FTSE 100 Edges Higher; Bank of England Flags AI Correction Risks

The FTSE 100 opened 7.84 points to 9,710.37 higher on Tuesday, supported by gains in housebuilding stocks and positive analyst commentary. However, overall sentiment remained cautious after the Bank of England warned of stretched valuations in the technology sector. 

Housebuilders Lead Gains After Broker Upgrade

Persimmon advanced 1.77% to £1,363.5, building on momentum after RBC upgraded its view on the company and set a higher price target of £1,750. 

Taylor Wimpey also recorded gains, which indicates broader confidence in the sector. Nationwide commented that the newly announced “high-value property tax,” which will apply to homes worth more than £2 million from 2028. 

The lender explained that the tax would apply to less than 1% of homes nationwide and only about 3% in London.

AI Valuation Risks Highlighted by Bank of England

The Bank of England used its latest financial stability report to warn that valuations of AI-driven technology companies will be significantly stretched. 

BoE noted that US equity valuations are at levels not seen since the dot-com bubble, while UK valuations are closer to those last observed before the global financial crisis. 

The Bank also highlighted the massive investment needs of AI companies, with infrastructure spending expected to exceed $5 trillion in the next five years. 

Lenders Stable as Stress Tests Passed

Lloyds edged up to £95.8, Barclays improved to £432.1, and NatWest slipped to £630.6. The Bank confirmed that every major UK lender comfortably passed the stress test and that none required additional capital strengthening. 

It also announced plans to reduce the sector-wide CET1 capital requirement from 14% to 13%, underscoring its confidence in UK banks.

Mixed Corporate Movers

Entain rose by 1.12% to £795.80 after a favourable assessment from JP Morgan. SSE added 0.86% to £2,225, benefiting from its defensive characteristics, while Marks & Spencer advanced 0.84% to £350.40. 

BP increased 0.67% to £460.60, and Diageo gained 0.66% t0 £1,759 despite mixed sentiment across consumer stocks.

On the otherhand, AstraZeneca declined 0.97% to £13,702, Games Workshop fell 0.61% to £19,510, Fresnillo lost 2.27% to £2,756, and Intercontinental Hotels Group dropped 0.34% to £9,966, reflecting varied sector pressures.

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UK Inflation Trends Ease as Retail Discounts Kick In

Shop price inflation eased again in November, falling to 0.6% from 1% in October, according to data from the British Retail Consortium and NielsenIQ. 

Retailers introduced aggressive Black Friday discounts earlier than usual, which helped pull down prices in categories such as fashion, electricals, and beauty. 

Food inflation also moderated to 3%, as promotions tempered rising costs in staples like dairy, fruit, bread, and cereals.