Britain’s troubled housebuilders were cheered yesterday as news of stake-building in Barratt Developments gave the sector a much needed shot in the arm.

In a disclosure to the London Stock Exchange, Barratt said that Polaris Capital Management, an American investment group, had taken a 6.2 per cent stake in the company. Polaris has been a significant shareholder in Barratt for about two years and has been raising its stake as the housebuilder’s share price has come under pressure, with the rest of its sector, amid fears of lower sales and falling house prices.

A Polaris fund manager was quoted last week in Building, a construction industry magazine, as saying that “investor panic and hysteria” was behind dramatic falls in housebuilders’ shares that had left them undervalued. However, the move is not expected to be the start of a bid for Barratt. The shares, which have almost quadrupled since early July, rose 30¼p to 158¼p.

Housebuilders also gained after Goldman Sachs raised target prices across the sector, noting that investors could be rewarded if share prices came back into line with the value of the companies’ assets. The broker said that share prices were already discounting average total writedowns of 46 per cent of 2007 book values by the end of 2009, although it did caution that stocks could be hit by further negative news on the UK housing market and that some companies may have to hold rights issues. Goldman subsequently upgraded its advice on Bellway, up 44½p to 648p, to “neutral”, from “sell”, noting its strong balance sheet. Taylor Wimpey rose 7¼p to 58½p, Persimmon40¾p to 410½p and Bovis Homes 42¼p to 480¼p.

Overall, the FTSE 100 rose 52.6 points to 5,541.8, as oil prices fell and financial stocks rallied. Royal Bank of Scotland, up 8½p to 249p, rose on reports that it was selling on loans to private equity, spurring Barclays up 13p to 379½p and Lloyds TSB up 12¾p to 330¾p.

Miners slipped as metal prices fell. Eurasian Natural Resources fell 64p to £10.60 after Kazakhmys, off 14p at £12.34, raised its stake above 25 per cent but said that it would not bid.

Ladbrokes lost 2p to 254p after Fitch, the ratings agency, downgraded the bookie’s outlook to “negative”, from “stable”, on concern that profitability could be hit by higher costs.

WPP, the advertising group, rose 8½p to 503p after Sir Martin Sorrell, its chief executive, claimed that GfK, the German market-research group, was misleading the stock market about its intention to bid against WPP for the researcher Taylor Nelson Sofres, up ¼p to 274p, and called for GfK to put up or shut up.

InterContinental Hotels rose 19½p to 750½p ahead of what are expected to be resilient first-half figures today. ITV rose 2.8p to 47.6p on reheated talk that Endemol might make a bid.

In the FTSE 250, Rentokil Initial rose 5¾p to 84¼p after signing a money-saving IT contract to improve systems, a key concern of the parcel delivery to pest control group’s new management.

— New York: Wall Street shares extended their gains as a stronger dollar boosted the allure of US investments and as Citigroup projected strong sales for Amazon.com’s electronic book reader. The Dow Jones industrial average closed up by 48.00 points at 11,782.30.

Explore Markets

• United States

• Europe

• Japan

• China

• Russia

• The Gulf

• India

• Africa

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive