The pound strengthened against the euro after a report showed U.K. house prices rose for the first time in nine months in February. Sterling was little changed versus the dollar before a report that analysts said will show U.K. construction contracted for a fourth month. It dropped below $1.50 for the first time in 2 1/2 years on March 1 after a gauge of manufacturing output unexpectedly shrank. House prices in England and Wales increased 0.1 percent from January, the property researcher Hometrack Ltd. said in a statement today. Gilts were little changed after 10- year yields touched a two-month low. The pound advanced 0.2 percent to 86.44 pence per euro at 9:20 a.m. London time. It reached 88.15 pence on Feb. 25, the weakest since October 2011. Sterling traded at $1.5055 after sliding to $1.4986 on March 1, the lowest level since July 2010. The yield on 10-year gilts was 1.88 percent after falling to 1.86 percent, the least since Dec. 31. It dropped 24 basis points last week. A gauge of construction activity rose to 49 last month from 48.7 in January, Markit Economics and the Chartered Institute of Purchasing and Supply will say today according to the median of nine estimates in a Bloomberg survey. A reading below 50 indicates contraction. The pound has depreciated 5.4 percent this year, the worst performer among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar gained 3.1 percent and the euro rose 1.6 percent. U.K. government bonds lost 0.2 percent this year through March 1, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bonds dropped 0.3 percent and Treasuries fell 0.1 percent. To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net; David Goodman in London at dgoodman28@bloomberg.net To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net

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