The rout in housebuilders’ shares that followed the Brexit vote is expected to force Berkeley Group out of the FTSE 100.
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The FTSE 100 Index fell 7.6 points to 6813.2, after heavyweight commodity stocks propped up the market following a copper and aluminium price ease.
Gold and silver miner Fresnillo lost more than 3 percent as gold prices hit two-month lows on worries over USA rate increase.
A company’s place in the FTSE 100 index is decided on the basis of its share performance. While numerous companies recovered, Berkeley group was not able to regain significant market capitalisation quickly enough.
Demotion can lower demand for a company’s shares as funds that track the index drop that stock from their portfolios.
Gold is seen as a safe investment in times of uncertainty, and its price has risen 25% this year. Silver prices have also increased, up by around 30 percent, and collectively this rally has helped Polymetal’s share price to increase by more than 90 percent.
The FTSE has managed to ride out the negative effects of Brexit since the global companies that dominate the index have had a lift from the post-Brexit drop in sterling, which typically boosts exporters. Higher interest rates increase the opportunity cost of holding non-yielding assets, like metals, and boost the value of the USA dollar (Intercontinental Exchange US:.DXY), in which metals are priced. UK-centric companies, however, are more exposed to the weakening of the domestic economy, and this is a part of the reason that Berkeley has struggled.
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Bank of England figures showed mortgage approvals for house purchases fell to 60,912 last month from 64,152 in June, the lowest since January 2015.
