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U.K. Stocks Jump Most Since July After ECB Holds Rates

U.K. stocks advanced for a second day, rising the most since July, after the European Central Bank and the Bank of England left interest rates unchanged.

Vodafone Group Plc (VOD), the second-largest mobile-phone carrier, climbed 3.7 percent after reporting a smaller drop in service revenue than analysts had predicted. Smith & Nephew Plc (SN/) added 2.5 percent after the maker of hip and knee implants posted quarterly profit that beat estimates. Michael Page (RB/) International Plc and Reckitt Benckiser Group Plc gained 3.3 percent after Credit Suisse Group AG upgraded their shares.

The FTSE 100 Index (UKX) added 100.39 points, or 1.6 percent, to 6,558.28 at the close of trading in London. The benchmark gauge lost 5.7 percent from its high on Jan. 20 through Feb. 4 amid a selloff in emerging-market currencies, signs of slowing economic growth in China and stimulus reductions from the Federal Reserve. The FTSE All-Share Index rose 1.5 percent today, while Ireland’s ISEQ Index gained 1.5 percent.

“Risk appetite has returned,” Jeremy Batstone-Carr, head of research at Charles Stanley & Co. in London, said in a telephone interview. “Numbers from the corporate sector have been quite positive. We’ve seen a dissipation of the crisis that has been embroiling emerging markets but it is still an uneasy, fragile calm.”

The BOE kept its benchmark rate at a record-low 0.5 percent. Governor Mark Carney and his colleagues are debating how they can reflect the strength of the U.K. economy in their forecasts without suggesting that rates are about to go up.

Economic Outlook

Officials are compiling a new quarterly economic outlook, due to be published next week, and reviewing how to guide expectations after unemployment plunged to within a whisker of the threshold for considering an interest-rate increase.

The ECB left the main refinancing rate at 0.25 percent, a decision predicted by 62 of 66 economists in a Bloomberg survey. The central bank also held the deposit rate at zero and the marginal lending rate at 0.75 percent.

The volume of shares changing hands in FTSE 100-listed companies was 29 percent greater than the average of the past 30 days, according to data compiled by Bloomberg.

Vodafone increased 3.7 percent to 223.9 pence. Service revenue excluding currency swings and acquisitions fell 4.8 percent in the third quarter, the company said. Analysts had predicted a 4.9 percent decline, according to the average estimate compiled by Bloomberg.

Smith & Nephew added 2.5 percent to 896 pence. The company said fourth-quarter revenue increased 5 percent for knee implants and 2 percent for hip implants. Smith & Nephew’s profit of 23.4 cents a share excluding some items beat the average analyst estimate of 22.8 cents.

Stock Upgrades

Michael Page gained 3.3 percent to 465.7 pence after Credit Suisse upgraded the U.K. recruitment company to outperform, similar to a buy recommendation, from neutral. The brokerage said hiring intentions suggest that client confidence is returning.

Reckitt Benckiser advanced 3.3 percent to 4,812 pence. Credit Suisse upgraded the maker of Nurofen painkillers and Durex condoms to outperform from neutral, citing that the company is back in shape.

Hargreaves Lansdown Plc (HL/) climbed 1.9 percent to 1,371 pence, rebounding after its biggest loss since August 2011. The U.K’s largest retail broker dropped 10 percent yesterday after saying its operating margin, a profitability measure, fell.

AstraZeneca Plc (AZN) fell 1.6 percent to 3,815.5 pence. The U.K.’s second-biggest drugmaker forecast a decline in profit and sales larger than analysts had estimated amid generic competition to its best-selling medicines.

To contact the reporter on this story: Jonathan Morgan in Frankfurt at jmorgan157@bloomberg.net

To contact the editor responsible for this story: Cecile Vannucci at cvannucci1@bloomberg.net

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