Nov. 6 (Bloomberg) -- U.K stocks climbed, extending the FTSE 100 Index’s steepest weekly advance in a month, as gains in shares of British Airways Plc and Royal Bank of Scotland Group Plc overshadowed the highest U.S. unemployment rate in 26 years.

British Airways jumped the most since August after saying passenger traffic and ticket prices may have turned a corner. RBS, Britain’s biggest government-controlled bank, rallied 5.3 percent even after posting a third-quarter loss. Rentokil Initial Plc led declining shares as the speed of recovery at its City Link courier unit disappointed some investors.

The FTSE 100 rose 17.08, or 0.3 percent, to 5,142.72, extending this week’s increase to 2 percent, after fluctuating between gains and losses at least 10 times. The FTSE All-Share Index added 0.4 percent today, while Ireland’s ISEQ Index advanced 0.2 percent.

“It really has been a game of two halves today with initial focus in the morning on the results from RBS and British Airways,” said David Jones, London-based chief market strategist at IG Index. “Most of the action came in the afternoon with the latest U.S. unemployment data.”

Stocks initially dropped after U.S. payrolls fell by a bigger-than-forecast 190,000 workers last month and the jobless rate exceeded 10 percent for the first time since 1983. Benchmark indexes later rebounded, extending the FTSE 100’s advance since the March lows to 46 percent.

‘Bailout’

“Even though we probably won’t see the sort of stellar gains that shares made in the summer, traders still don’t seem quite ready to head for the exits and bailout,” Jones said.

British Airways rose 6.7 percent to 198.8 pence. Europe’s third-biggest carrier said premium traffic fell 1.4 percent last month versus a 7.9 decline in September and that volumes and yields, a measure of revenue per passenger, are now stable. The airline said its first-half loss widened to 217 million pounds ($360 million).

About 16 percent of British Airways’ stock has been lent, a indication of short-sellers’ interest, according to Data Explorers, a research company based in London and New York.

RBS advanced 5.3 percent to 37.06 pence, trimming this week’s decline to 12 percent. The bank had a third-quarter loss of 1.8 billion pounds after 3.3 billion pounds of provisions for bad loans and credit-market writedowns.

“RBS is still a recovering basket case, but it’s going in the right direction,” said John Smith, a fund manager at private bank Brown Shipley & Co. in Manchester, which manages about 2 billion pounds, including RBS shares. “The news was bad, but could have been worse.”

Irish Banks

Allied Irish Banks Plc jumped 9.2 percent to 1.92 euros after the lender said it sold a five-year bond not covered by the government guarantee, and the latest stage of Ireland’s National Asset Management Agency legislation was passed by lawmakers. Bank of Ireland Plc increased 4.2 percent to 1.99 euros in Dublin.

Rentokil, the world’s biggest pest control company, declined 6.3 percent to 105 pence even after reporting increased third-quarter operating profit.

“The guidance on City Link losses was less bullish than had been expected by some commentators,” analyst Andrew Darke of Ambrian Partners wrote in a report. “The results also show that the driving force in the improved group profitability remains on the cost side rather than revenue.”

Great Portland Estates Plc led gains by real estate companies, climbing 4.4 percent to 259.7 pence. JPMorgan Chase & Co. upgraded the shares to “overweight” from “neutral,” citing an “attractive valuation” and a 15 percent drop in the share price since its peak in September. The company reports half-year results next week.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.

Last Updated: November 6, 2009 13:00 EST