By Tricia Wright
LONDON (Reuters) - Housebuilder Persimmon led the FTSE 100 lower on Friday on the prospect of less stimulus from the Bank of England and signs that politicians are fearful of a property bubble.
Chancellor George Osborne has asked the BoE to play a bigger role in ensuring that his controversial "Help to Buy" housing programme does not cause a new property boom.
Persimmon shed 4.3 percent as investors took profits on a near 50-percent rally seen since the start of the year. Mid-cap peers Bellway, Bovis Homes and Barratt Developments all fell around 3 percent.
"Housebuilders are taking quite a big hit today, they've had quite a good performance for the year-to-date and there is a bit of banking profits," said Jonathan Roy, broker at London Stone Securities.
"This is a sector that's very much supported by government policy and there has been a lot of speculation that it's turning into a bubble."
Trading volumes in Persimmon stood at 208 percent of its 90-day daily average, with those for Bellway, Bovis and Barratt between 102 percent and 155 percent, against 77 percent and 85 percent respectively for the FTSE 100 and FTSE 250.
Sentiment in the sector was also hit by comments from BoE governor Mark Carney that he sees no need for more bond-buying stimulus given the recovering economy.
The FTSE 100 closed down 52.93 points, or 0.8 percent, at 6,512.66 points, pressured by a 1.7 percent drop in miners as investors, anxious over budget and debt negotiations in Washington, sold out of cyclical shares.
The fiscal issues which Washington is up against have increasingly unsettled investors since the U.S. Federal Reserve's surprise decision to keep its economic stimulus programme of bond-buying, which has driven a global equities rally, unchanged for now.
The lack of progress could lead to a Federal shutdown on October 1 and a default in mid-October, but a resolution could see the FTSE 100 break above the recent range it has been trapped in - between around 6,400 and 6,650 - analysts say.
"If we can tick off the political boxes in the States, I'm sure risk assets will continue to perform strongly... I can see them rally into year end," Ian Richards, head of equity strategy at Exane BNP Paribas, said.
Craig Erlam, analyst at Alpari, reckoned that once 6,650 is broken, which he expects by the end of October, 6,700 will be the next target, followed by 6,790 and 6,875.
In spite of the current U.S. fiscal tensions, investors remain optimistic on the outlook for equities, according to the latest Halifax Share Dealing Market Tracker survey.
On average, more than a quarter of investors are planning to increase their holdings, with just over 5 percent saying they will shrink their exposure to certain sectors.
Energy and mining stocks generate the biggest level of likely activity, with over 38 percent of investors saying they plan to increase their holdings, and 7.5 percent saying they plan to decrease holdings in the sectors, the survey said.
(Additional reporting by Toni Vorobyova; Editing by Christina Fincher)