House building stocks were shaken by a surprise announcement by the Bank of England that it is to scrap a flagship initiative rewarding mortgage lending.
The Funding for Lending scheme (FLS), launched last year to encourage banks and building societies to lend by offering them cheap credit, will be refocused next year on stimulating borrowing for small businesses.
It came as the FTSE 100 Index drifted, rising just five points to 6654.5, in the absence of any impetus from Wall Street, where traders are away for the Thanksgiving holiday.
Meanwhile, improvements in economic sentiment in the eurozone helped bourses in France and Germany nudge higher.
The FLS move, designed to prevent the emergence of a new bubble in the housing market, prompted a rise in sterling as it was viewed by some in the financial markets as a tightening in monetary policy.
The pound was up one cent against the greenback to $1.63, while it was flat against the single currency at €1.20.
FLS and the Government's Help to Buy scheme have been a boon to the house building industry in recent months, lifting shares in Persimmon by more than 50% in the last year.
The FTSE 100 construction firm, which trades as Charles Church and Westbury Partnerships, fell by 6% or 76p to 1170p.
A host of second-tier rivals were also impacted, including Taylor Wimpey down 7.1p at 107.4p, Bellway off 85p to 1446p, Bovis Homes down 45.5p to 777p and Redrow 14.9p lower at 273.5p.
At the other end of the FTSE 250, shares in Thomas Cook jumped by 15% after the holiday giant slashed losses and highlighted further steps in its turnaround.
Announcing underlying earnings growth for the first time in three years, chief executive Harriet Green upped performance targets under the recovery plan, helped by the faster-than-expected progress on slashing costs from the group.
Thomas Cook shares rose 22.5p to 175.7p, while blue-chip rival TUI Travel benefited from the improved sentiment in the sector as shares rose 6.9p to 369.7p.
B&Q owner Kingfisher was a big faller in the FTSE 100 after it said its markets remain challenging, particularly in France after a 5.6% fall in third quarter underlying profits at the Castorama and Brico Depot arm.
A strong performance from Screwfix meant profits in the UK and Ireland were up 7.9% but Kingfisher's shares still slipped 17.4p to 378.6p.
Pub chain Marston's was 7% or 11.4p lower at 143.7p in the FTSE 250 Index after it said underlying profits were 1% higher at £88.4 million in the year to October 5.
The company also announced the £90 million sale of 202 pubs to a retail property firm, a move which will help it reduce the interest payments on its £1 billion debt mountain.
The biggest FTSE 100 risers were Rio Tinto, up 122p to 3261p, Fresnillo up 23p to 835.5p, Old Mutual up 5.4p to 199.4p and Anglo American up 36.5p to 1375p. The biggest fallers were Persimmon, down 76p to 1170p, Kingfisher down 17.4p to 378.6p, Travis Perkins down 49p to 1783p and easyJet down 33p to 1411p.
Asian shares were in a buoyant mood, with Japanese stocks hitting their highest close in nearly six years after the yen fell sharply on relatively positive US economic data, while two major regional currencies slumped.
US jobless claims unexpectedly fell last week and the November Thomson Reuters/University of Michigan consumer confidence improved from a preliminary reading, while the Chicago PMI held up better than expected last month after surging in October.
A soft October durable goods report was the only dent to an otherwise upbeat set of figures.
The Indonesian rupiah fell to its psychological support at 12,000 per dollar, the first time since March 2009. The currency is seen vulnerable to capital outflows once the US Federal Reserve begins dialling back the massive stimulus that has fuelled asset prices in emerging markets.
The dollar hit a six-month high against of 102.28 yen on Wednesday, adding to a 0.8% gain overnight and setting its sight on a 4-1/2 peak of 103.74 yen reached in May.
As the yen tumbled, Tokyo's Nikkei finished up 1.8% at 15,727.12 yesterday, the highest closing level since December 2007. The Nikkei is up 51% this year in local currency terms, outpacing a 27 % jump in the US S&P 500 and a 16% rise in the STOXX Europe 600 index.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article