Housebuilders dent London's FTSE 100 even as consumer staples gain

(Reuters) -UK's blue-chip index ended lower on Monday as housebuilders were hit by $5.4 billion in costs to remove cladding from buildings, while a weaker pound lifted consumer staples.

The FTSE 100 ended 0.5% lower following weekly gains spurred by a rotation into sectors such as banks, oil & gas and mining as investors priced in faster interest rate hikes by major central banks.

Large dollar earners including Diageo, Unilever, British American Tobacco, Reckitt Benckiser gained between 0.7% and 2%, lifted by the weaker pound.

Berkeley Group, Barratt Developments, Persimmon and Taylor Wimpey were down between 3.0% and 2.8% after Britain ordered housebuilders to pay around $5.4 billion to help remove dangerous cladding from buildings following a deadly 2017 London fire.

Housing minister Michael Gove set an early-March deadline for the industry to agree to a fully funded plan of action, including a dedicated fund to deal with unsafe cladding.

"The housebuilders have benefited from generous incentives, such as Help to Buy and the mortgage guarantee scheme, in recent years. However, state support is not a one-way street and the sector needs to do its bit to look after its customers," said Russ Mould, investment director at AJ Bell.

Persimmon had the least risk due to its low exposure, while Barratt, Bellway, Berkeley & Taylor Wimpey all had the higher risk of a more meaningful step up in provisions, Jefferies analysts said.

Housebuilders Redrow, Countryside Properties, Bellway and Vistry Group dropped between 2.8% and 4.4%, while the FTSE 250 index slipped 1.5%, recording its fourth consecutive-session in losses.

Big banks such as HSBC, Barclays and Standard Chartered rose about 1% each, building on last week's gains.

Plus500 rose 3.1% after the online trading platform said it expects annual results to exceed market expectations, even as it reported slower fourth-quarter growth.

Biotech firm Avacta Group slumped 33.4% after it said it was halting sales of its COVID-19 antigen lateral flow test, AffiDX, to replace antibodies in the device and boost its ability to detect the Omicron variant at lower viral loads.

(Reporting by Sruthi Shankar and Amal S in Bengaluru; Editing by Shounak Dasgupta, William Maclean)