U.K. Stocks Gain as U.S. Housing Starts Exceed Estimates

U.K. stocks advanced as a report showed housing starts in the U.S. climbed faster than analysts had estimated and Associated British Foods Plc (ABF) gained.

AB Foods jumped 6.7 percent after reporting a surge in revenue at its budget-clothing business. International Consolidated Airlines Group Plc rose 3.2 percent following a report the company’s Spanish unit has reached an agreement with unions. Rio Tinto Group lost 1.8 percent after announcing $14 billion of writedowns and the departure of its chief.

The FTSE 100 Index (UKX) added 0.3 percent to 6,120.41 at 1:38 p.m. in London, rebounding from an earlier drop of as much as 0.3 percent. The gauge has risen 3.8 percent this year after U.S. lawmakers agreed to a compromise budget to prevent automatic tax increases and spending cuts from taking effect. The broader FTSE All-Share Index (ASX) also advanced 0.3 percent today, while Ireland’s ISEQ Index gained 0.4 percent.

“The overall market is treading water as the earnings season heats up in the U.S. and Europe,” said Richard Hunter, head of U.K. equities at Hargreaves Lansdown Plc in London, in a phone interview. “Rio Tinto hasn’t helped the mining sector today even though the news may be taken positively in the medium term as the company looks to take its foot off the pedal in terms of making acquisitions,”

The volume of shares changing hands in FTSE 100 companies today was 10 percent greater than the average of the last 30 days, according to data compiled by Bloomberg. The price- earnings ratio for the FTSE 100 peaked at 15.8 times trailing earnings on Jan. 11, its highest level in two years.

Housing Starts

In the U.S., a Commerce Department report showed that housing starts increased at an annual pace of 12.1 percent in December, beating the median economist estimate in a Bloomberg survey for a gain of 3.3 percent. They dropped 4.3 percent in November. A separate release from the Labor Department showed that initial claims for jobless benefits retreated to 335,000 last week from a revised 372,000 the previous week.

AB Foods jumped 6.7 percent to 1,660 pence after the company said the performance of its Primark clothing chain has caused the business to beat its forecasts in the financial year to date. Primark’s revenue surged 25 percent from a year earlier in the 16 weeks ended Jan. 5, the company said in a statement. The sugar unit’s sales increased 12 percent.

IAG gained 3.2 percent to 209.4 pence after El Pais reported that its Spanish unit Iberia has agreed with unions to keep capacity cuts to less than 14.5 percent. The newspaper cited unidentified participants at the meetings between Iberia and its unions and said an Iberia spokesman declined to comment.

Rio Tinto

Rio Tinto dropped 1.8 percent to 3,397.5 pence after the world’s second-biggest mining company said Tom Albanese will step down as CEO and Sam Walsh, currently the head of Rio Tinto’s most profitable division, will replace him.

Doug Ritchie, who oversaw the A$3.9 billion ($4.1 billion) purchase of Mozambique coal producer Riversdale Mining Ltd. in 2011 will also step down as Rio cuts the value of its coal assets in the East African country by about $3 billion.

The bulk of the writedown will come from Rio’s aluminum businesses, most of which were obtained through Albanese’s $38 billion purchase of Alcan Inc. in 2007. Rio reduced the value of the operations by $8.9 billion last February.

Citigroup Inc. raised its recommendation for the shares to buy from neutral. The stock earlier fell as much as 4.6 percent.

Xstrata Plc (XTA) and Glencore International Plc (GLEN) fell 1.7 percent to 1,123.5 pence and 1.4 percent to 375.1 pence, respectively.

Home Retail

Home Retail Group Plc surged 14 percent to 138.4 pence, the biggest gain on the broader All-Share Index. The retailer said full-year earnings will beat estimates because sales accelerated at its Argos catalog chain over Christmas.

Group underlying pretax profit will be about 10 million pounds more than the market consensus of 73 million pounds. Home Retail (HOME) also said it will have more than 300 million pounds of cash at the end of its fiscal year.

The company is one of the most shorted stocks on the FTSE All-Share with 22 percent of shares out on loan, according to the most recent data from Markit.

Aberdeen Asset Management Plc (ADN) dropped 1.8 percent to 384.5 pence after reporting a 3.3 percent increase in funds under management to 193.4 billion pounds ($310 billion) in the fourth quarter as clients invested in Asia. The stock rose 6.7 percent from the start of the year through yesterday.

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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