U.K.’s FTSE 100 Posts Biggest Three-Day Rally Since April 2009

U.K. stocks climbed for a third day, the biggest three-day rally on the FTSE 100 Index (UKX) since April 2009, as better-than-forecast Japanese economic growth reassured some investors that the global recovery is intact.

Fresnillo Plc (FRES), the world’s largest primary silver producer, gained 4.1 percent amid optimism that demand for metals will increase. Spectris Plc (SXS) rallied 4.3 percent after the maker of instruments and controls agreed to buy U.S. manufacturer Omega Engineering on a debt and cash-free basis.

The FTSE 100 Index climbed 30.55, or 0.6 percent, to 5,350.58 at the 4:30 p.m. close in London, extending last week’s gain. Stocks rallied last week after the largest increase in U.S. retail sales in four months tempered concern that economic growth is slowing. The gauge has rallied 6.9 percent in the past three days. The FTSE All-Share Index advanced 0.6 percent today, while Ireland’s ISEQ Index surged 1.3 percent.

The FTSE 100 had declined 16 percent from the beginning of July through Aug. 10, wiping more than $566 billion from the value of U.K. shares, as investors speculated that Europe would fail to contain its sovereign-debt crisis and that the U.S.’s economic recovery would falter. The slump has pushed down the gauge’s price-to-earnings ratio to 9.5 times the estimated earnings of its constituent companies, below the average multiple of 11.5 over the last five years, according to data compiled by Bloomberg.

“Our central scenario is that we are not going to face a double dip,” said Richard Lacaille, chief investment officer at Boston-based State Street Global Advisors Inc., which has $2.1 trillion in assets, in a Bloomberg Television interview in London. “Valuation indicators are showing that markets are becoming more interesting, more attractive.”

Japan’s GDP

Japan’s gross domestic product shrank at an annualized 1.3 percent rate in the three months ended June 30. The median forecast of 25 economists surveyed by Bloomberg called for a 2.5 percent drop.

Fresnillo rallied 4.1 percent to 1,796 pence. Contracts to buy silver for September delivery climbed as much as 1.4 percent.

Oil-services companies climbed after Transocean Ltd., the world’s largest offshore driller, offered to buy Norway’s Aker Drilling ASA for 7.9 billion kroner ($1.5 billion) to expand its fleet of rigs able to drill in deep water and rough seas. Amec Plc (AMEC) soared 4.8 percent to 949 pence and Wood Group Plc gained 1.6 percent to 568 pence.

Spectris rallied 4.3 percent to 1,407 pence. The maker of instruments and controls said it paid $475 million to acquire Omega Engineering, funding the deal from cash and bank loans.

Michael Page International Plc (MPI) plunged 8.1 percent to 368 pence, its largest drop since October 2008, as the U.K. recruitment company said gross profit growth is slowing in the banking industry.

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

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

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