Morning Note: Market news and an update from housebuilder Persimmon.

Market News

The dollar slipped as traders digested the latest US CPI report, which reinforced expectations that the Fed will cut the fed funds rate next month. Headline annual inflation held at 2.7% in July, below forecasts of 2.8%. The data suggested tariff-related inflationary pressures remain limited for now, giving the Fed room to deliver a 0.25% rate cut in September. However, it may be too soon to tell given the figures were dragged lower by a 9.5% decline in fuel prices – core inflation (which strips our food and energy) accelerated more than expected to 3.1%.

Scott Bessent suggested the central bank should be open to a 50 basis points reduction. Bets that the Fed will cut interest rates by more than 25 bps in September gained traction, with traders adding some $2m in premium to a position in the SOFR. Several Fed members are due to make speeches today, potentially shedding more light on policy. Treasuries were mixed this morning with the curve steepening – the 10-year Treasury yields 4.28% - while gold recovered some of its recent loss to trade at $3,355 an ounce.

Bessant also ruled out Chinese investments in the US could be part of any trade pact. US tariff revenue hit a record in July, though the monthly budget deficit still widened. The Fed’s Tom Barkin told the WSJ that lower-income consumers are deferring purchases, which may limit the inflationary impact of tariffs.

Volodymyr Zelenskiy said he won’t cede the eastern region of Donbas to Russia. The Ukrainian president and European leaders are set to talk with Donald Trump and JD Vance today.

US equities moved to new highs last night – S&P 500 (+1.1%); Nasdaq (+1.4%) – on the rate cut speculation. Small caps were also a big outperformer as Russell 2000 posted best day since May. In Asia this morning, stocks were also firm: Nikkei 225 (+1.3% to another record high); Hang Seng (+2.4%); Shanghai Composite (+0.4%). Japan’s five-year bond auction drew the weakest demand ratio since 2020. The FTSE 100 is currently 0.4% higher at 9,178, while Sterling trades at $1.3520 and €1.1560.

Source: Bloomberg

Company News

Persimmon has released its first-half results against a backdrop of challenging market conditions and constrained affordability. The company has reiterated its full-year profit guidance, although warned that margins will be impacted by industry factors further out. In response, the shares are down 2% in early trading, leaving them on a small premium to reported net assets per share.

Persimmon is one of the UK’s leading housebuilders, operating a diverse UK-wide network across c 280 active outlets, with a target of 300. The company’s three brands, Persimmon Homes, Charles Church, and Westbury Partnerships, each serve a different segment of the market. The group’s ambition is to achieve a 20% housing operating margin and 20% ROCE over the medium-term.

In the first six months of 2025, the group completed 4,605 new homes, up 4%, leaving it on track for completions of 11,000-11,500 homes for the full year. Private completions rose 7% to 3,987 homes.

The number of sales outlets rose by 4% to 277. The total net private sales rate of 0.70 per outlet per week represents 191 sales per week, up 3%.

The group’s new home average selling price increased by 8% to £284k. Private average sales price on completions rose by 7% reflecting a higher proportion of Charles Church and robust pricing.

New housing revenue rose by 12% to £1.31bn. The underlying housing gross margin remained flat in the period at 20.1%, with the impact of residual embedded build cost inflation continuing to be a feature in the period, as expected.

The company generated underlying operating profit up 13% to £172m, driven by increased volume and ongoing operational discipline. As a result, the operating margin nudged up to 13.1%, while underlying return on capital rose from 10.0% to 11.2%.

Persimmon has a strong strategic land pipeline, with 82,504 plots owned and under control at 30 June. The company continued to invest in future growth, with £210m spend on land in the first half. 5,066 plots achieved detailed planning in the period, equivalent to 110% of completions. The forward sales position rose by 11% year on year to £1.25bn.

The group ended the period with a strong and well capitalised balance sheet with £123m of cash and £401m of land creditors. The half-year dividend was maintained at 20p. The Board’s intention is, as a minimum, to maintain the 2024 dividend of 60p per share (5.4% yield), with a view to growing this over time. 

In the five weeks since 30 June 2025, net private sales rates bulk have been 0.68 a touch lower than last year. Given progress in opening new outlets, this equates to weekly sales of 188 compared to 183 in the same period last year. The company is now c.80% secured on private completions for the full year.

While management is mindful of geopolitical events and challenging market conditions, including uncertainty in advance of the Budget, Persimmon continues to expect to deliver between 11,000 and 11,500 completions for the full year with a housing operating margin of between 14.2% and 14.5%, enabling the delivery of strong underlying profit growth over two years.

Further out, the group currently expects volume to grow to c.12,000 units in 2026 with operating margin progression similar to 2025 positioning it well for another year of good profit growth. The pace of margin progression will be impacted by diminishing embedded build cost inflation, on-going affordability constraints, and increased industry-wide costs. However, with a stable housing market, the company remains confident of further growth in outlets, volume, and profit.

Source: Bloomberg