U.K. Stocks Advance, Paring Weekly Drop for FTSE 100; Aviva Shares Jump
U.K. stocks advanced, trimming the FTSE 100 Index’s weekly decline, as an increase in U.S. consumer sentiment outweighed lingering concern that Europe’s debt crisis may put the global economic recovery at risk.
Insurers gained after two people with knowledge of the situation said RSA Insurance Group Plc made a bid for Aviva Plc’s general insurance business in the U.K., Canada and Ireland. Kazakhmys Plc and Xstrata Plc led losses among basic- resources companies.
The FTSE 100 rose 9.38, or 0.2 percent, to 5,275.44 as of the 4:30 p.m. close in London, after earlier dropping as much as 0.8 percent. The gauge declined 1.1 percent this week after sliding 2.4 percent on Aug. 11 as the Federal Reserve said the U.S. economy’s recovery is likely to be “more modest” than forecast and the Bank of England cut its estimate for U.K. growth. The FTSE All-Share Index gained 0.2 percent today, while Ireland’s ISEQ Overall Index retreated 1.4 percent.
“The choice as to whether Wednesday was a one-off panic or a sign of things to come has -- for the FTSE 100 at least -- seemingly come down on the side of a welcome buying opportunity,” said Simon Denham, chief executive officer of London Capital Group Holdings Plc in London. “As we oscillate around 5,300, clients seem to be getting into the swing of buying after any down days and selling after the ups.”
The Thomson Reuters/University of Michigan preliminary index of U.S. consumer confidence climbed to 69.6 in August following a reading of 67.8 last month that was the lowest since November. The gauge was forecast to rise to 69, according to the median forecast of 65 economists in a Bloomberg News survey.
Germany’s economy grew in the second quarter at the fastest pace since the country’s reunification two decades ago. Gross domestic product surged 2.2 percent from the first quarter, highlighting the growth differential across the euro region in a period that saw the Greek fiscal crisis threaten to break the euro region apart. Italy’s economy expanded 0.4 percent in the quarter and Spain’s 0.2 percent, while Greece experienced a 1.5 percent contraction.
Spanish bonds fell today and the extra yield investors demand for holding Greek debt instead of German bunds rose to the most since May on concern flagging growth in nations on Europe’s periphery will crimp the region’s recovery. Other reports today showed U.S. retail purchases increased less than forecast in July and consumer prices rose.
‘Averse to Risk’
“The slowdown in growth that we anticipate has started to be priced into markets and will go on doing so until the end of the year,” said Vincent Treulet, chief investment strategist at BNP Paribas Investment Partners in Paris. “This is a market that remains averse to risk, and especially to sovereign risk.”
Aviva gained 5.5 percent to 387.4 pence as two people with knowledge of the situation said RSA made a 5 billion-pound ($7.8 billion) bid for Aviva’s general insurance assets.
The bid was rejected by Aviva and there are no current negotiations between the two companies, said the people, declining to be identified because the matter is private. Officials at Aviva and RSA declined to comment. RSA, the U.K.’s biggest non-life insurer, slipped 0.9 percent to 127.4 pence. Legal & General Group Plc, the U.K.’s second-largest life insurer by assets, climbed 3.2 percent to 90.75 pence. Standard Life Plc rose 3 percent to 209.8 pence.
TUI Travel Plc, the travel operator that this week warned profit will be at the lower end of analyst estimates, jumped 4.5 percent to 201.2 pence. Goldman Sachs Group Inc. upgraded the shares to “buy” from “neutral,” citing its low valuation.
Kazakhmys, Kazakhstan’s biggest copper producer, dropped 1.2 percent to 1,156 pence. Xstrata, the world’s biggest exporter of coal for power stations, fell 1.1 percent to 995.6 pence.
Vedanta Resources Plc, the mining company controlled by billionaire Anil Agarwal, plunged 5.9 percent to 2,053 pence, extending this week’s retreat to 20 percent. The company is in advanced talks to buy more than 50 percent in Cairn Energy Plc’s Indian oil-exploration unit, according to two people with knowledge of the matter. Cairn Energy advanced 3.4 percent to 468.3 pence.
QinetiQ Group Plc, Britain’s former defense-research laboratory, dropped 5.5 percent to 109.2 pence, the lowest level since its 2006 initial public offering. Defense Secretary Liam Fox said he accepts his department has to share the burden of deficit reduction after his attempt to exempt Britain’s nuclear- weapons system from budget cuts was rebuffed by the Treasury.