U.K.’s FTSE 100 Advances; Prudential, Burberry Gain

U.K. stocks advanced the most in three weeks after Janet Yellen, nominated to be the next chairman of the Federal Reserve, said the central bank should take care not to withdraw stimulus too early.

Prudential Plc, Britain’s biggest insurer by market value, climbed 1.9 percent after saying nine-month sales rose 6 percent. Burberry (BRBY) Group Plc gained after reporting first-half earnings. Serco Group Plc (SRP) plunged the most in at least 22 years after forecasting a decline in profit.

The FTSE 100 Index (UKX) gained 36.13 points, or 0.5 percent, to 6,666.13 at the close of trading in London, rebounding from yesterday’s 1.4 percent loss. The benchmark has rallied 13 percent this year as central banks around the world committed to maintaining stimulus measures. The broader FTSE All-Share Index (ASX) increased 0.6 percent today, while Ireland’s ISEQ Index rose 0.5 percent.

“The market is interpreting Yellen’s comments as she will continue the policy, or even go deeper,” Nathalie Pelras, who helps oversee 2.6 billion euros ($3.5 billion) at KBL Richelieu Gestion in Paris, said. “Yellen meant the economy needs more liquidity and that the Fed cannot take it out very quickly. Without that, the market would not be supported. It’s good for the market, but it means the macro is not so good.”

Critical Juncture

Yellen’s testimony comes at a critical moment for monetary policy. The Federal Open Market Committee she is poised to lead is considering whether to begin slowing its $85 billion monthly bond-purchase program, which is pushing the Fed’s assets toward a record $4 trillion.

“It’s important not to remove support, especially when the recovery is fragile and the tools available to monetary policy, should the economy falter, are limited given that short-term interest rates are at zero,” Yellen said in testimony to the Senate Banking Committee in Washington today.

Stocks kept gains even as U.K. retail sales unexpectedly fell in October. Sales including fuel dropped 0.7 percent from September, when they rose 0.6 percent, the Office for National Statistics said. The median forecast of 19 economists in a Bloomberg News survey was for stagnation in sales.

Prudential (PRU) rose 1.9 percent to 1,266 pence. The insurer said sales until Sept. 30 this year advanced as gains in the U.S. and Asian markets offset a decline in the U.K.

Revenue climbed to 3.27 billion pounds ($5.3 billion) from 3.08 billion pounds in the year-earlier period, the company said. That met the 3.26 billion-pound average estimate of 18 analysts surveyed by the company.

Burberry Earnings

Burberry added 1.9 percent to 1,489 pence. The U.K.’s largest luxury-goods maker said first-half earnings were little changed as the start of its own beauty business and weaker wholesale revenue offset growth in retail sales.

Adjusted pretax profit for the six months ended Sept. 30 was 173.9 million pounds compared with 173.4 million pounds a year earlier, the company said today, less than a month after forecasting that the earnings would be around last year’s level.

J Sainsbury Plc (SBRY) gained 1 percent to 414.6 pence. Citigroup Inc., HSBC Holdings Plc, Natixis and Exane BNP Paribas raised the recommendation on the stock after the U.K.’s third-largest supermarket company yesterday said first-half earnings climbed 7 percent.

Citigroup analysts raised their recommendation on Sainsbury shares to buy from neutral, or hold, and their price estimate to 470 pence from 400 pence. They wrote in a report that the stock is priced for sluggish growth that may prove too pessimistic, while profit margins in the industry may fare better than estimated.

Trinity Mirror

Trinity Mirror Plc (TNI), which publishes the Daily Mirror newspaper, gained 20 percent to 166 pence, its highest price since April 2010. The company said it expects to report full-year earnings at the high end of market expectations.

Serco plunged 17 percent to 419.1 pence, the worst performance since at least 1991. The services company forecast a decline in profit next year as it grapples with a criminal inquiry into the handling of U.K. government prison contracts.

Centrica Plc (CNA) dropped 5.1 percent to 345.3 pence, for the worst performance in the FTSE 100. The biggest energy supplier to U.K. homes cut its margin outlook, citing a political debate over rising bills.

3i Group Plc (III) fell 4.6 percent to 353.8 pence even as Britain’s largest publicly traded private-equity firm said that it will pay a special dividend after proceeds from asset sales almost doubled.

Tesco Plc (TSCO) declined 2.3 percent to 356.15 pence. Goldman Sachs Group Inc. cut its recommendation on shares of the supermarket chain to sell from neutral, citing competition from online providers. William Morrison Supermarkets Plc fell 2.9 percent to 266.2 pence as Goldman also reiterated a sell on Tesco’s rival.

To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net

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

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