U.K. stocks advanced to a five-week high as a rally in mining companies and optimism that central banks will support growth outweighed a report showing that British manufacturing unexpectedly contracted.
BHP Billiton Ltd. (BHP) and Rio Tinto Group led commodity companies higher after Alcoa Inc., the largest U.S. aluminum producer, reiterated its estimate that global demand for the metal will rise. Royal Bank of Scotland Group Plc climbed as Goldman Sachs Group Inc. advised buying the shares. Marks & Spencer Group Plc slid 1.4 percent after reporting that general-merchandise sales fell for the eighth consecutive quarter.
The FTSE 100 (UKX) added 63.01 points, or 1 percent, to 6,513.08 at the close in London, extending yesterday’s 1.2 percent gain. The gauge rallied 2.6 percent last week, its second-largest increase this year, as the Bank of England and the European Central Bank pledged to keep interest rates low for the foreseeable future. The FTSE All-Share Index also jumped 1 percent today, while Ireland’s ISEQ Index climbed 0.6 percent.
“What’s interesting about Alcoa is that it is a company that straddles several businesses, and can give you an outlook for sectors from automobiles to miners to defense,” said Stephane Ekolo, chief European strategist at Market Securities in London, in a phone interview. “The fact the BOE and the ECB have guided to low interest rates has reassured the market.”
The number of shares changing hands on FTSE 100-listed companies was 7.3 percent lower than the average of the past 30 days, data compiled by Bloomberg shows.
U.K. manufacturing unexpectedly shrank in May as the production of pharmaceuticals and metals dropped, casting doubt on the strength of the recovery in the second quarter.
Factory output fell 0.8 percent from April, the Office for National Statistics said. The median forecast of 25 economists in a Bloomberg News survey had called for a 0.4 percent increase. Total industrial production was unchanged, because of higher oil-and-gas production.
BHP Billiton added 2.4 percent to 1,729.5 pence, while Rio Tinto advanced 2.5 percent to 2,736.5 pence. Vedanta Resources Plc (VED), the metals producer controlled by billionaire Anil Agarwal, jumped 8.5 percent to 1,094 pence.
Alcoa reported profit and sales that beat analysts’ estimates following a better-than-expected performance at its engineered-products business, the unit that supplies components to aerospace and power companies. Alcoa repeated its estimate that demand for aluminum will rise this year by 7 percent globally and by 11 percent in China.
A report showed that producer prices fell 2.7 percent in China, the world’s largest consumer of metals.
RBS rose 5.4 percent to 304.4 pence, the second-best performance on the FTSE 100. Goldman Sachs raised its recommendation on the state-owned bank to buy from neutral, saying a split of RBS would allow the bank to focus on profitable operations while accelerating its privatization.
Marks & Spencer (MKS) dropped 1.4 percent to 453.2 pence. Clothing sales at U.K. stores open at least a year fell 1.6 percent in the 13 weeks ended June 29, the London-based retailer said. That compared with the median estimate of 12 analysts surveyed by Bloomberg for a 1 percent decline. Sales in the food division climbed 1.8 percent on the same basis, in line with the median analyst estimate.
Weir Group Plc (WEIR) rose 2.8 percent to 2,162 pence. Morgan Stanley raised its recommendation on the engineering-solutions company to equal weight, or hold, from underweight. The brokerage said Weir has exceeded its estimates in oil and gas.
Aveva Group Plc (AVV) jumped 14 percent to 2,578 pence, its largest gain since October 2008. The provider of information-technology systems said that demand has grown in Europe, the Middle East, Africa and Asia. In the Americas, Aveva said, “there are early signs that business activity is beginning to pick up in Brazil.”
Smiths News Plc (NWS) surged 7.7 percent to 168 pence, its largest advance since April 24, 2012. The U.K. distributor of newspapers and magazines announced two contract extensions worth about 322 million pounds ($478 million) a year.
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