FTSE 100 Benchmark Gains Most in Two Weeks; Shares of TUI Travel Rally

U.K. stocks gained, sending the FTSE 100 Index to its biggest rally in two weeks, as U.S. service industries expanded more than forecast, travel companies surged and Japan pledged more aid to stimulate its economy.

British Airways Plc posted the biggest advance on the benchmark FTSE 100 after passenger traffic rose last month by the most in more than two years. TUI Travel Plc rose 4.2 percent as Europe’s largest tour operator said bookings for the winter had strengthened. Inmarsat Plc sank 4 percent after Philip Falcone’s Harbinger Capital Partners said it will sell part of its holding and won’t make an offer for the rest of the company.

The FTSE 100 climbed 79.79, or 1.4 percent, to 5,635.76 at the 4:30 p.m. close of trading in London. The measure has rallied 17 percent since this year’s low in July as investors speculated that the world economy will avoid another recession even as European governments slash spending and U.S. growth slows. The FTSE All-Share Index advanced 1.4 percent today and Ireland’s ISEQ Index rose 1.2 percent.

“Sentiment was given a boost by the news out overnight” from Japan, said Nick Serff, a markets analyst at City Index Ltd. in London. “Naturally investors in Europe will now look to the Bank of England and the Fed to toe a similar line to maintain fragile economic growth.”

Japan’s central bank cut its benchmark interest rate and said it will create a 5 trillion yen ($60 billion) fund to buy government bonds and other assets to support the economy.

ISM Data

In the U.S., the Institute for Supply Management’s index of non-manufacturing businesses, which covers about 90 percent of the world’s largest economy, rose to 53.2 from 51.5 in August. The gauge, where readings greater than 50 signal growth, averaged 55.3 during the six-year expansion that ended in December 2007. The median forecast of 76 economists surveyed by Bloomberg News projected the ISM index would rise to 52.

British Airways climbed 6.5 percent to 254.6 pence after saying passenger traffic rose last month for the first time since February as bookings to Europe and the Middle East surged and the threat of strikes receded.

Last month’s rebound was led by a 4.3 percent increase in first- and business-class traffic, British Airways said, with demand gaining 0.7 percent in coach. Yields, a measure of average ticket prices, were “strong” across the cabin, it said.

TUI Travel

TUI Travel surged 4.2 percent to 225.9 pence. The travel company said in a statement today that bookings for winter 2010/2011 have “further strengthened,” and that full-year results will be “in line with previous guidance.” Net debt is expected to be lower than guidance, the company said.

The TUI Travel statement is “encouraging,” Johannes Braun, an analyst at Commerzbank AG in Frankfurt, wrote in a report today. “September bookings seem to have been better than expected, which is encouraging after its recent warning that austerity measures, especially in the U.K., would affect tourism demand.”

Inmarsat lost 4 percent to 629 pence. Falcone’s Harbinger Capital sold 65 million ordinary shares of Inmarsat, or 14.1 percent of the company, for 410 million pounds.

Computacenter Plc, which supplies computer services to BT Group Plc and BAE Systems Plc, climbed 7.6 percent to 322.9 pence, leading rising shares on the FTSE 250 Index. Investec Securities upgraded the shares to “buy” from “hold.”

To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net.

To contact the editor responsible for this story: David Merritt at dmerritt1@bloomberg.net.

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