U.K. Stocks Climb for Second Day on Chinese Manufacturing

U.K. stocks advanced to their highest level in eight weeks, led by a rally in energy and mining companies, as measures of manufacturing from China to the U.K. and the euro area exceeded economists’ forecasts.

Rio Tinto Group, the world’s third-largest mining company, and BP Plc (BP/) both climbed more than 1 percent. Barclays Plc (BARC) jumped 3.4 percent after Chairman Marcus Agius resigned. Aviva Plc (AV/) advanced 3.7 percent amid reports the insurer has considered selling some of its divisions.

The FTSE 100 Index (UKX) increased 69.49 points, or 1.3 percent, to 5,640.64 at the close in London, its highest level since May 4. The gauge rallied 1.4 percent on June 29, completing its biggest monthly gain since October, after euro-area leaders agreed to ease conditions on bailout loans to Spanish banks and pledged to spend 120 billion euros ($151 billion) to stimulate the region’s economy.

“We have seen some promising data today and last week’s agreement in Europe to provide funding directly to banks rather than sovereigns is a step in the right direction,” said Richard Hunter, head of equities at Hargreaves Lansdown Plc in London. “I am not totally convinced about investors’ conviction in the long term. The first half of the year was typified by an almost daily switch between risk on and risk off.”

The broader FTSE All-Share Index rose 1.2 percent today, while Ireland’s ISEQ Index gained 0.5 percent. The volume of shares traded on the FTSE 100 was 19 percent lower than the average of the last 30 days, data compiled by Bloomberg show.

Chinese Manufacturing

Stocks advanced today as a measure of China’s manufacturing industry performed better than economists had predicted. The government’s PMI fell to 50.2 in June from 50.4 in May, the National Bureau of Statistics and China Federation of Logistics and Purchasing reported in Beijing yesterday. That beat the 49.9 median estimate in a survey of 24 economists.

A Markit Economics index of euro-area manufacturing output held at 45.1 in June, compared with an initial estimate of 44.8 earlier this month. A gauge for the U.K. climbed to 48.6, exceeding the median forecast in a Bloomberg News survey. Readings below 50 mean that the industry contracted.

Rio Tinto led mining shares higher, climbing 1.4 percent to 3,060.5 pence. BHP Billiton Ltd., the world’s largest mining company, increased 1.3 percent to 1,830 pence and Anglo American Plc gained 1 percent to 2,109 pence.

BP, Tullow

BP, Europe’s second-largest oil company, gained 2.5 percent to 432.5 pence and Tullow Oil rose 1.6 percent to 1,493 pence. Petrofac Ltd. (PFC) added 3.5 percent to 1,437 pence, while Weir Group Plc (WEIR) increased 2.2 percent to 1,563 pence.

Energy-related companies climbed as oil extended its rally after the close of European trading last week. Crude for August delivery surged 9.4 percent on June 29 in New York, its biggest advance in three years. The contract lost 2.6 percent to $82.79 a barrel today as investors took profits.

Barclays rallied 3.4 percent to 168.4 pence, rebounding from last week’s 19 percent selloff. Agius resigned after the bank was fined a record 290 million pounds ($455 million) for trying to rig interest rates, sparking a political outcry.

John Sunderland, a Barclays director and former chairman of Cadbury Schweppes Plc, will oversee the search for a replacement. Michael Rake will become deputy chairman. Agius, 65, will remain in his post until his replacement is appointed.

Libor Rigging

He is the most senior executive to step down following probes by global regulators into whether lenders colluded to manipulate Libor. Chief Executive Officer Robert Diamond remains under pressure from lawmakers after U.K. and U.S. regulators found the lender attempted to rig the London and euro interbank- offered rates for profit.

Diamond wrote in a letter to employees that he had the support of the bank’s directors and that he would implement the recommendations of a review into the Libor submissions.

Royal Bank of Scotland Group Plc (RBS) climbed 1.7 percent to 219 pence after sliding 11 percent last week. The Press Association reported that the lender has dismissed 10 traders for their part in the alleged manipulation of Libor. The news agency cited unidentified sources.

Aviva jumped 3.7 percent to 282.7 pence as the Sunday Telegraph reported the insurer has considered selling or closing as many as 15 of its 58 divisions. The newspaper didn’t say where it got the information.

Separately, the Sunday Times reported that Aviva has fired dozens of senior managers after carrying out a review of its business, without citing anyone. The insurer’s incoming chairman John McFarlane has eliminated four layers of management at its London headquarters and conducted a month-long review of the company’s operations, according to the newspaper. The company may also sell its American division for more than 1 billion pounds, the report added.

Industry Recommendation

Insurers (SXXP) also advanced as Morgan Stanley raised its recommendation for the industry in Europe to overweight, the equivalent of a buy recommendation, saying the sector looks “cheap” relative to its history.

Prudential Plc (PRU) increased 1.8 percent to 751.5 pence, Legal & General Group Plc (LGEN) gained 0.9 percent to 128.5 pence and Old Mutual Plc (OML) added 1.7 percent to 154 pence.

Invensys Plc (ISYS) climbed 1.4 percent to 225.8 pence after the the Sunday Times reported that China South Locomotive & Rolling Stock Corp. is in the early stages of planning a possible 2 billion-pound takeover bid for the company. The newspaper did not say where it got the information.

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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