Bovis Homes was among the casualties on Thursday as the London market reversed the previous day’s rally.
Britain’s most profitable housebuilder dropped 5.6 per cent to 370p after Goldman Sachs said the group’s lack of social housing exposure made earnings vulnerable and would likely result in asset write-downs at its interim results next month.
Bovis said on July 9 that it would not expect material inventory provisions at the half-year stage.
“We expect the announcement of substantial write-downs at Bovis to have a negative read for its shares and the sub-sector,” said Eshan Toorabally, analyst, who added Bovis to Goldman’s “conviction sell” list.
The broker also moved Berkeley Group to a “conviction sell” stance, sending the stock lower by 0.8 per cent to 803½p.
Berkeley’s exposure to London and the south-east is “a near-term negative” because these markets have historically trailed the nationwide trend, said Mr Toorabally.
The FTSE 100 closed down 87.6 points at 5362.3, reversing its 85.8 point gain on Wednesday. London chased Wall Street lower after a steeper than expected fall in US existing home sales.
Miners weighed on the Footsie after Outokumpu, the world’s fourth-largest maker of stainless steel, wrote down €100m ($157m) of nickel inventories and warned that distributors were delaying purchases.
ENRC lost 6.5 per cent to 949p and BHP Billiton was down 4.7 per cent to £15.40.
Aricom, a Russia-based iron ore producer reliant on Chinese steelmakers, dropped 14.6 per cent to 57p.
Aquarius Platinum slid 7.2 per cent to 530p after missing production targets for a quarter marred by industrial action and cost inflation.
Lonmin, its larger peer, was off 6 per cent to £21.45.
British Energy jumped 6.2 per cent to 728½p on hopes that French group EDF would agree a takeover as early next week.
Responding to a BBC report, British Energy said it was in advanced talks with one party. The nuclear group rejected an offer of 680p made by EDF in May and is said to be holding out for more than 750p a share.
Centrica, off 0.6 per cent to 308¼p, is said to be negotiating with EDF to be a minority partner in the acquisition.
Kingfisher led the blue-chip risers, up 6.5 per cent to 124.3p, after reporting an unexpected sales improvement at its B&Q chain.
But other retailers faded after UK retail sales fell 3.9 per cent by volume in June, the sharpest decline since records began in 1986.
Next was down 4.5 per cent to £10.16 and Marks and Spencer fell 3.8 per cent to £10.25.
Among the banks, Alliance & Leicester ticked higher by 2.5 per cent to 351p. HSBC upgraded the bank to “outperform” to reflect its positive view on Santander, which has had an all-share bid for A&L accepted.
Lloyds TSB was down 2.5 per cent to 338p after Citigroup dropped the lender from its “buy” list in a sector note predicting that the UK economy would move into a prolonged recession.
“Worst-case scenario is rapidly becoming the base case,” Tom Rayner, analyst , said. “We expect the decline in profitability to prove longer lasting than the credit crisis itself.”
London Stock Exchange was up 3 per cent after Morgan Stanley upgraded it to “equal weight” on valuation.
Takeover gossip helped G4S, the security services group, tick up 0.9 per cent to 201¾p. The stock was also tipped by Nick Batsford, a widely followed technical analyst.
Newspaper publisher Trinity Mirror advanced 3.9 per cent to 92¼p amid speculation it could be a target for media conglomerate BCCL, which owns The Times of India.
There was a speculative buzz around satellite operator Inmarsat, up 0.3 per cent to 460½p. Some dealers believe Harbinger, the activist hedge fund that is Inmarsat’s 28 per cent shareholder, may look to offer its stake to a communications industry rival.
Harbinger, which owns stakes in US satellite companies Terrestar and SkyTerra, said this week that it had suspended takeover talks with Inmarsat because of the regulatory process relating to any potential offer.