U.K. Stocks Climb as Mining Shares Rebound; Stagecoach Rallies in London

U.K. stocks climbed for the second time in three days as Chancellor of the Exchequer George Osborne detailed the deepest ever cuts to Britain’s budget.

Stagecoach Group Plc, Go-Ahead Group Plc and National Express Group Plc surged after the government retained bus subsidies. Xstrata Plc and Anglo American Plc led a gauge of mining companies higher as copper advanced in London. Smith & Nephew Plc advanced 3.2 percent after U.S. rival Stryker Corp. raised its earnings forecast.

The benchmark FTSE 100 Index rose 25.04, or 0.4 percent, to 5,728.93 at the 4:30 p.m. close in London, having swung between gains and losses at least 10 times today. The gauge has risen 3.3 percent this month amid optimism central banks are prepared to ease monetary policy further to support the economic recovery. The FTSE All-Share Index gained 0.4 percent today, while Ireland’s ISEQ Index slid 0.4 percent.

The impact of the government’s spending review “has been well digested by investors over the weeks running up to today’s announcement,” wrote Jeremy Thomas, chief investment officer for U.K. equities at the RCM unit of Allianz Global Investors, which manages about $1.1 trillion. “Markets detest uncertainty, and in combination with yesterday’s Strategic Defence Review, getting these announcements behind us could be helpful.”

Detailed Cuts

Osborne today detailed cuts to the U.K.’s budget that eliminate almost half a million public-sector jobs. The plans would reduce public spending by 83 billion pounds ($131 billion) after inflation, narrowing a deficit that the government forecasts at 10.1 percent of gross domestic product this year to 2.1 percent of GDP in the 2014-15 fiscal year. Debt interest costs would fall by more than 5 billion pounds by 2015.

Xstrata rallied 3.4 percent to 1,291 pence, Anglo American Plc increased 3.2 percent to 2,871 pence and Rio Tinto Group climbed 2.7 percent to 4,056 pence.

A gauge of mining shares on the Stoxx Europe 600 Index rallied 2.1 percent, paring a three-day selloff. Copper prices rebounded from the biggest drop in three months as a slide in the dollar enhanced the appeal of commodities as alternative investments.

Stagecoach, the operator of Britain’s busiest commuter-rail service, surged 9.4 percent to 205.1 pence, the biggest gain since September, 2009. Go-Ahead advanced 7.7 percent to 1,227 pence and National Express added 4.7 percent to 249.4 pence.

Osborne said that bus subsidies paid directly to operators will be reduced by 20 percent, saving 300 million pounds by 2015.

Less Than Suspected

“The cut in the direct subsidy is less than the market had suspected,” said Geoff van Klaveren, a transport analyst at Deutsche Bank AG in London with a “buy” rating on Stagecoach stock. “The concern was that it would be cut completely.”

BAE Systems Plc, Europe’s largest defense company, dropped 2 percent to 349.9 pence. The shares fell as Osborne confirmed the budget for the Ministry of Defence will reach 33.5 billion pounds in 2014-15, a saving of 8 percent over the period.

Prime Minister David Cameron yesterday announced the scrapping of an order for BAE’s Nimrod reconnaissance aircraft and said fewer, cheaper planes are needed for new aircraft carriers.

Smith & Nephew increased 3.2 percent to 568 pence after Stryker, the U.S. maker of artificial body parts and hospital equipment, said it expects to earn between $3.27 and $3.30 a share in 2010. That topped analyst estimates of $3.26 a share.

The following stocks also rose or fell in London and Dublin. Stock symbols are in parentheses:

Autonomy Plc (AU/ LN), the U.K.’s second-largest software company, rallied 4.2 percent to 1,505 pence after Goldman Sachs Group Inc. said in a report today that the company remained “the premier strategic asset in the software sector and could appeal to a platform vendor.” The bank also maintained their “buy” recommendation on the shares.

Hansen Transmissions International NV (HSN LN) plunged 15 percent to 43 pence, a record low. The maker of products used in wind generators and cooling towers said revenue for the 2011 fiscal year will fall about 10 percent from 2010. The company had previously forecast revenue to grow between 5 percent and 10 percent.

Home Retail Group Plc (HOME LN) lost 2.4 percent to 214.7 pence after the U.K. owner of the Homebase home-improvement chain and Argos catalog stores reported a 23 percent drop in first-half pretax profit to 94.7 million pounds.

Stobart Group Ltd. (STOB LN) dropped 8.6 percent to 143 pence after the U.K. trucking company cut its full-year profit forecast. Reduced spending by Network Rail and increased overall finance costs will affect profit, the company said.

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

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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.