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U.K. Stocks Climb on U.S. Manufacturing Data; Rio Tinto Rallies

U.K. stocks rallied the most in almost two months after U.S. and Chinese manufacturing growth accelerated, easing concern that the economy will stumble back into recession.

Rio Tinto Plc and Antofagasta Plc gained more than 6 percent as copper climbed to four-month high and other base metals advanced. Fresnillo Plc surged 2.7 percent as gold gained. Cable & Wireless Worldwide Plc jumped 7.7 percent amid speculation that AT&T Inc. may make a bid. TUI Travel Plc soared 9.2 percent after a report that its parent group will buy the shares in the company that it doesn’t already own.

The FTSE 100 Index increased 2.7 percent, the most since July 6, to a three-week high of 5,366.41 at the 4:30 p.m. close in London. The gauge has climbed 12 percent from this year’s low on July 1 as concern eased that Europe’s sovereign-debt crisis will choke off the global recovery. The FTSE All-Share Index advanced 2.6 percent today, while Ireland’s ISEQ Index added 2.1 percent.

“Better-than-expected data have put some fire back into markets,” said David Jones, London-based chief strategist at IG Index. “The month has started well and has certainly set the tone for possible further gains, but only if they can be underpinned by decent numbers.”

The Tempe, Arizona-based Institute for Supply Management reported today that its index of U.S. manufacturing rose in August to 56.3, from 55.5 the previous month. The median forecast of 78 economists in a Bloomberg News survey was for a drop to 52.8. Readings greater than 50 signal growth.

Chinese Economy

Earlier, China’s purchasing managers’ index climbed to 51.7 last month from 51.2, exceeding forecasts, according to a government-backed report, signaling that the slowdown in the world’s second-largest economy is stabilizing. Manufacturing in China posted its weakest performance in July since early 2009. A separate PMI released by HSBC Holdings Plc and Markit Economics rose to 51.9 from 49.4. A reading above 50 indicates expansion.

Rio Tinto, the world’s third-biggest miner, advanced 6.1 percent to 3,501 pence as copper climbed in London to its highest price since April. Aluminum, nickel, lead, tin and zinc also gained. Antofagasta, the copper producer controlled by Chile’s Luksic family, added 6 percent to 1,094 pence, the highest price since April.

Fresnillo, a silver and gold producer, gained 2.7 percent to 1,119 pence, extending its winning streak to a fourth day. Kazakhmys Plc rose 6.9 percent to 1,236 pence. Gold for immediate delivery climbed 0.5 percent to $1,253.93 an ounce, the highest price since June 28.

Cable & Wireless, TUI Travel

Cable & Wireless Worldwide surged 7.7 percent to 71.95 pence, the biggest gain since March, as investors speculated that AT&T or one its competitors may bid for the British company.

“The rumor is driving the share price,” said Tom Gidley-Kitchin, an analyst with Charles Stanley Group Plc in London.

AT&T spokesman Niall Hickey said the company doesn’t comment on market speculation. Cable & Wireless spokespeople couldn’t immediately be reached for comment.

TUI Travel soared 9.2 percent to 216.4 pence, the largest gain in more than five months, after Financial Times Deutschland reported that majority owner TUI AG is deciding whether to acquire the shares that it doesn’t already own.

Mouchel Group Plc, which has had buyout approaches from VT Group Plc in recent months, added 7.3 percent to 125 pence after the company said its order book and pipeline remain at about 2 billion pounds ($3.1 billion), making its outlook “increasingly positive.”

UBM Climbs

United Business Media Ltd. gained 3.4 percent to 570.5 pence after the publisher of InformationWeek said it bought Astound LLC for an initial payment of $120,000 and a further performance-related payment of as much as $3 million in installments over the next three years.

Hill & Smith Holdings Plc, which supplies motorway barriers to U.K. construction companies, fell 3.6 percent to 268.5 pence after a report showed U.K. manufacturing growth grew at its slowest rate in nine months in August.

A gauge based on a survey of companies by Markit Economics and the Chartered Institute of Purchasing and Supply dropped to 54.3 from a revised 56.9 in July, London-based Markit said. The median estimate of 23 economists in a Bloomberg News survey was for a reading of 57, down from an initial July level of 57.3.

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