Monday lunchtime business bulletin

Jun 16 2008 By Andrew Mernin

The UK’s major housebuilders began a stock market fightback today amid speculation of a City bail-out for the battered sector.

Weekend reports of a funding move to put their finances on a firmer footing, organised by investment bank UBS, sent shares higher. Barratt Developments - whose stock slumped 39% last week - gained more than 14% in the FTSE 250 Index.

Charles Church builder Persimmon, which is due to be relegated from the FTSE 100 Index, picked up 5% after shedding 8% over the previous week.

The advances were accompanied by significant gains for other builders including Taylor Wimpey - up 9% - as well as Redrow, Bovis Homes and Bellway.

The mini-revival came after major investors were said to be ready to fund housebuilders directly to spare struggling firms the added pressure of having to call on shareholders to support rights issues.

UBS, said by the Sunday Telegraph to be organising the move, declined to comment.

Housebuilders have come under heavy pressure after a mortgage squeeze from lenders hit by the credit crunch. Falling house prices and wider economic uncertainty are also causing would-be buyers to sit on their hands.

Barclays was the stand out performer in London’s top flight today after the group confirmed it was considering a share issue to bolster its balance sheet.

Shares rose by as much as 13% as investors responded positively to the potential move - thought to involve a £4bn cash injection from sovereign wealth funds - alongside a reassuring trading update.

Other banks were in better shape in the wake of the announcement, helping the FTSE 100 Index climb 10.9 points to 5813.7 by mid-morning.

Barclays was later 6% or 20.5p higher at 338.5p, while Alliance & Leicester lifted 9p to 347.75p and Royal Bank of Scotland rose 3p to 239.25p.

Halifax Bank of Scotland, which will this week update on trading in its right issue prospectus, gained 2.5p to 324.25p. That was on top of the 13% rise seen on Friday after the City watchdog proposed new rules on short selling during rights issues.

The British-born chief executive of American International Group (AIG) bowed to pressure last night and ended a 36-year association with the insurer.

Martin Sullivan, 53, who was raised in Dagenham, Essex and joined AIG as a 17-year-old clerk in the company’s London office, ended his three-year tenure at the helm after facing calls to quit from shareholders.

During recent months Mr Sullivan has overseen write-downs and losses of over 30 billion US dollars (£15.4bn), leading his predecessor and AIG’s largest shareholder, Maurice Greenberg, to speak out against Mr Sullivan.

Mr Sullivan, who announced a sponsorship deal with Manchester United in 2006, is believed to have submitted his resignation ahead of an emergency board meeting last night. He is the latest victim of the credit crisis, joining Citigroup chairman Chuck Prince and Merrill Lynch’s chief executive Stan O’Neal.

The pound at 10am was US$1.9571 compared to US$1.9499 at the previous close while the euro at 10am was £0.7889  compared to £0.7884 at the previous close.