U.K. Stocks Rise as U.S. Unemployment Rate Declines

U.K. stocks climbed, with the FTSE 100 Index advancing for the first week in three, after unemployment in the U.S. unexpectedly declined last month.

Burberry (BRBY) Group Plc jumped 2.8 percent after Morgan Stanley recommended investors buy the retailer’s shares. John Wood Group Plc (WG/) climbed by the same amount after the company said it is confident of meeting full-year projections. BAE Systems Plc (BA/) fell amid a report its merger with European Aeronautic, Defence & Space Co. may fall through.

The FTSE 100 rose 43.24 points, or 0.7 percent, to 5,871.02 at the close in London, extending its advance this week to 2.3 percent. The gauge swung between gains and losses yesterday as central-bank policy makers kept borrowing costs at record lows. The FTSE All-Share Index also increased 0.8 percent today, while Ireland’s ISEQ Index added 1.1 percent.

“Good employment figures from the U.S. were always going to lift equity markets,” said Angus Campbell, head of market analysis at Capital Spreads in London. The unemployment figure “could almost certainly be enough to keep Barack Obama in office following next month’s U.S. elections. The markets are likely to be happy with such a result.”

U.S. jobless rate unexpectedly fell to 7.8 percent in September, the lowest since President Barack Obama took office in January 2009, from 8.1 percent as employers took on more part-time workers, a report showed.

Nonfarm Payrolls

The economy added 114,000 workers last month after a revised 142,000 gain in August that was more than initially estimated, according to Labor Department figures. The median economist estimate called for an advance of 115,000.

The FTSE 100 (UKX) has rallied 12 percent since its 2012 low on June 1 after European Central Bank officials agreed on an unlimited asset-purchase program and the U.S. Federal Reserve announced a third round of quantitative easing to help support growth and spur hiring.

Burberry rose 2.8 percent to 1,028 pence after Morgan Stanley upgraded the U.K.’s largest luxury-goods company to overweight from equalweight, saying the balance between risk and reward is “attractive” for the stock. The rating is equivalent to a buy recommendation.

There are “growth concerns, but the Burberry brand remains intact,” Louise Singlehurst, an analyst at Morgan Stanley, wrote in a note to clients. “Burberry rarely looks cheap, but we see 19 percent upside to base case and 60 percent in our bull scenario.”

The shares slumped 26 percent last month after the company warned that full-year profit will be at the lower end of analyst estimates amid a more “challenging” environment.

Energy Market

Wood Group climbed 2.8 percent to 833.5 pence after the oil-services provider said it’s confident of meeting full-year forecasts. The company said it continues to deliver growth amid “favorable” conditions in the energy markets.

Rentokil Initial Plc climbed 1.4 percent to 88.45 pence amid speculation the world’s biggest pest control company could become a takeover target. Jefferies Group Inc. analyst, Justin Jordan, said press reports of a private equity bid of 145p a share is "certainly possible."

Mining companies also advanced, as a gauge of basic- resource producers rallied 1.1 percent after a three-day retreat. Vedanta Resources Plc (VED) jumped 3.4 percent to 1,101 pence, Kazakhmys Plc (KAZ) increased 4.5 percent to 738 pence and Rio Tinto Group gained 2.2 percent to 2,987 pence.

BAE slid 1.6 percent to 328.10 pence after Der Spiegel reported that merger negotiations with EADS had all but broken down because the governments in the U.K., Germany and France failed to agree on state involvement in the future entity. The magazine cited politicians it didn’t identify.

EADS today said it continues to work toward an Oct. 10 deadline to present a merger agreement with BAE, responding to the article.

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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