U.K. Stocks Advance After Iran Agrees on Nuclear Limits

U.K. stocks advanced, following a three-week decline, as Iran’s nuclear deal with world powers reduced the potential for conflict in the Middle East.

International Consolidated Airlines Group SA (IAG) and EasyJet Plc (EZJ) climbed at least 2 percent, pushing a gauge of travel and leisure companies higher, as oil prices slid. SABMiller Plc (SAB) rose after Morgan Stanley advised investors to buy shares in the world’s second-biggest brewer. Petrofac Ltd. (PFC) added 1.8 percent after the oil-and-gas engineering company obtained a joint $2.1 billion contract in Oman.

The FTSE 100 Index (UKX) gained 20.32 points, or 0.3 percent, to 6,694.62 at the close in London. The gauge lost 0.3 percent last week after Federal Reserve minutes showed the central bank may reduce the pace of its stimulus in coming months as the economy improves. The broader FTSE All-Share Index added 0.4 percent today, while Ireland’s ISEQ Index rose 0.5 percent.

“The Iran nuclear accord has gone a long way to easing fears over Middle East tension, and has subsequently helped lower oil prices,” Alastair McCaig, a market analyst at IG in London, wrote in e-mailed comments. “IAG appears to be best placed to cut costs judging by its share price movement.”

Iran agreed to limit its nuclear program in exchange for as much as $7 billion in relief from economic sanctions over six months. Iran and the six countries it has entered a pact with -- the U.S., U.K., Germany, France, Russia and China -- aim to conclude a comprehensive deal during that time.

First Breakthrough

The accord is the first major breakthrough in the dispute over Iran’s nuclear program since 2003. Questions over the purpose of that plan had increased the threat of conflict in the Middle East, sparked threats of military action by the U.S. and Israel, and raised concerns that the oil-rich region was heading for a nuclear arms race.

In the U.S., a report from the National Association of Realtors showed an index of pending sales of previously owned houses decreased 0.6 percent in October, following a revised 4.6 percent drop a month earlier. Economists had forecast an increase of 1 percent in a Bloomberg survey.

The volume of shares changing hands in FTSE 100-listed companies was 30 percent lower than the average in the last 30 days, data compiled by Bloomberg showed.

IAG climbed 2.8 percent to 372.8 pence. EasyJet added 2.1 percent to 1,434 pence, its highest price since Aug. 5. Carnival Plc rose 2 percent to 2,272 pence. A gauge of travel and leisure companies advanced 1.6 percent, posting the biggest gain among the 19 industry groups in the Stoxx Europe 600 Index, the regional benchmark. Brent crude dropped, leading energy prices from gasoline to heating oil lower.

SABMiller, Petrofac

SABMiller increased 1.1 percent to 3,254.5 pence. Morgan Stanley upgraded its recommendation on the brewer to overweight, equivalent to buy, from equal weight. The brokerage cited the potential for improving returns and higher cash returns to shareholders.

“Valuations are neutral against the peer group, but SAB has growth for longer,” Morgan Stanley wrote.

Petrofac gained 1.8 percent to 1,212 pence after obtaining a joint contract with South Korean partner Daelim Industrial Co. to upgrade a refinery in Oman.

Chemring Group Plc (CHG) rallied 9.6 percent to 213 pence, for its biggest gain in 15 months. The supplier of defense systems for combat jets said it will sell some business units to improve its financial position.

Babcock International Group Plc (BAB) declined 3.1 percent to 1,284 pence. The engineering company said it is in exclusive talks to form a joint venture with Avincis Mission Critical Services Group SA, a helicopter-service provider.

Numis Securities Ltd. and Panmure Gordon & Co. downgraded the stock to hold from buy and Investec Plc lowered its rating to hold from add. Babcock has rallied 37 percent this year compared with the FTSE 100’s 13 percent advance. Panmure wrote in a note today that earnings increases are needed for the stock to climb higher.

Essar Energy Ltd. tumbled 13 percent to 87.35 pence, its lowest since its London listing in May 2010. The energy company said it expects refining margins in Europe to remain under pressure.

To contact the reporter on this story: Inyoung Hwang in London at ihwang7@bloomberg.net

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

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