U.K. Stocks Climb After U.S. Data; Man Group, IAG Rally

U.K. stocks rallied, rebounding from yesterday’s biggest selloff in two weeks, as a U.S. report showed home sales in the world’s largest economy were stronger than forecast in March.

Man Group Plc (EMG) jumped as UBS AG said the hedge-fund manager could be a takeover target. International Consolidated Airlines Group SA gained as analysts upgraded the British Airways owner. Aviva Plc (AV/) led insurers higher, rallying 4.2 percent.

The benchmark FTSE 100 Index (UKX) rose 0.8 percent to 5,709.49 at the close in London as banks and mining companies recovered some of yesterday’s losses. The FTSE All-Share Index gained 0.8 percent today, while Ireland’s ISEQ Index climbed 0.4 percent.

“Better U.S. data has helped markets to regain their composure,” said London-based Ben Critchley, a sales trader at IG Index. “Despite the subdued nature of today’s trading, and a prevailing atmosphere of caution, markets have managed to post modest gains.”

U.S. sales of new homes ran at a 328,000 annual rate in March, down 7.1 percent from a revised 353,000 pace in February that was stronger than initially projected, a Commerce Department report showed. The median economist forecast was for a rate of 319,000 last month, according to a Bloomberg survey.

Stocks sank yesterday as manufacturing contracted in the euro area and China and as Dutch Prime Minister Mark Rutte offered to resign after struggling to clinch an austerity deal.

The FTSE 100 has lost 4.3 percent since its 2012 high on March 16 amid renewed concern the euro-area, the U.K.’s largest export partner, is yet to contain its debt crisis. The volume of shares changing hands on the gauge today was 13 percent lower than the average of the last 30 days, data compiled by Bloomberg shows.

Man Group

Man Group climbed 4.8 percent to 97 pence, paring yesterday’s 3.3 percent retreat as UBS recommended investors buy shares of the world’s largest publicly traded hedge fund manager, saying it is a “likely” takeover target.

“With Man Group shares having traded below 150 pence for a six-month period, we believe that a 50 percent-plus premium bid offer to the current share price would be sufficient to obtain shareholder approval,” analyst Arnaud Giblat wrote in a report to clients.

The stock has lost 23 percent so far this year as assets at its flagship AHL diversified fund declined.

IAG (IAG) climbed 3.6 percent to 168.5 pence as Credit Suisse Group AG upgraded the airline company to overweight, the equivalent of a buy rating, citing an “encouraging outlook for summer pricing” on the transatlantic market.

Aviva jumped 4.2 percent to 311.6 pence, rebounding from yesterday’s 2.1 percent selloff. Sanford C. Bernstein initiated coverage of the insurer with an outperform rating citing pockets of “substantial operating earnings growth” for the U.K. life insurance sector.

Legal and General Group Plc, Prudential Plc (PRU) were also rated outperform in new coverage at Sanford C. Bernstein. The shares rose 1.1 percent to 117.6 pence and 1.7 percent to 737.5 pence respectively.

Reed Elsevier Plc rallied 2 percent to 526 pence after the publishing company forecast revenue and profit growth for the year as demand increases for subscriptions to its science, technology and health journals.

Reed’s exhibitions business will also expand this year after acquisitions of shows in Brazil and China and an increase in biennial conferences, the company said.

Associated British Foods

Associated British Foods Plc (ABF) gained 2 percent to 1,239 pence after the world’s second-biggest sugar producer reported first-half adjusted pretax profit of 363 million pounds ($586 million), beating analysts’ estimates. The company said it expects “substantial” growth in full-year earnings boosted by gains at its sugar unit and the Primark clothing chain.

Cove Energy Plc (COV) climbed 4.6 percent to 227 pence after Royal Dutch Shell Plc agreed to buy the company and raised its bid to 1.12 billion pounds, securing a stake in gas fields discovered off Mozambique.

Shell increased its offer for Cove to 220 pence a share from 195 pence, matching a rival offer from Thailand’s PTT Exploration & Production Pcl. Cove’s board agreed to the offer.

Shell, Europe’s largest oil company, gained 1 percent to 2,130 pence today as crude oil advanced.

Stagecoach Group Plc (SGC) increased 1.9 percent to 252.2 pence as UBS upgraded the operator of Britain’s busiest commuter-train service to “buy” from “neutral.”

ARM Slides

ARM Holdings Plc (ARM) slid 6.2 percent to 531.5 pence after the chip designer forecast “broadly flat” second-quarter sales from royalties as semiconductor clients rebuild inventories.

The first quarter was “probably the low point of the cycle,” AMR Chief Financial Officer Tim Score said today on a conference call. The company also maintained its full-year forecast.

Capita Plc (CPI) dropped 6.4 percent, the most since October 2008, to 682.5 pence as Citigroup Inc. and Deutsche Bank AG sold about 40 million shares on behalf of the company, raising 274 million pounds. The shares were sold at 685 pence apiece.

Carpetright Plc (CPR) fell 1.5 percent to 598 pence after the retailer said deteriorating sales in Europe and disappointing demand for beds in the U.K. will cause annual earnings to plummet.

Underlying pretax profit for the year ending April 28 will be 3 million pounds to 4 million pounds, the company said today in a statement. Carpetright had profit by that measure of 16.9 million pounds a year earlier.

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

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

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