U.K. stocks rose for a second day as Next Plc reported a jump in first-half earnings and investors speculated that the slump in shares during the past two months isn’t commensurate with the outlook for companies’ earnings.
Next posted its steepest advance in a year after the U.K.’s second-largest clothing retailer increased its annual profit forecast. Kingfisher Plc climbed 2.4 percent.
The benchmark FTSE 100 Index rose 52.77, or 1 percent, to 5,227.02 at the 4:30 p.m. close in London. The gauge last month slumped 7.2 percent, dragging equities to their cheapest valuation compared with estimated earnings since March 2009, according to data compiled by Bloomberg. The FTSE All-Share Index also gained 1 percent today, while Ireland’s ISEQ Index advanced 1.9 percent.
“Valuations for European equities are very cheap relative to other asset classes and very attractive for longer-term investors,” said Nigel Bolton, the head of European equities at BlackRock Inc. in London.
European stocks rose for a second day as investors speculated that China may still buy the region’s government bonds even as concern increases that Greece may default. France’s Credit Agricole SA and Societe Generale SA today had their credit ratings cut by Moody’s Investors Service, which now plans to examine the impact of tighter financing markets on French lenders.
Greece’s Debt Crisis
“A Greek default is not going to ripple the same way and in the same magnitude that we saw in 2008,” Paul Chew, head of investments at Brown Advisory in Baltimore, said in an interview in London. “We got into the current situation in a much better state than in 2007. That makes us confident than any crisis in Greece is not going to snowball.”
Next climbed 6.3 percent to 2,483 pence. The shares closed at their highest price since 1988 after Chief Executive Officer Simon Wolfson said consumer spending may start to improve in the second quarter of 2012.
Kingfisher advanced 2.4 percent to 239.6 pence. Burberry Group Plc rose 5.6 percent to 1,367 pence.
Asos Plc jumped 3.7 percent to 1,725 after HSBC Holdings Plc upgraded its recommendation on the shares to “overweight” from “neutral.”
Entertainment One Ltd. surged 19 percent to 194.5 pence after saying it will consider “strategic options,” which may include a sale of the company, in response to interest it has received. The company has hired JPMorgan Chase & Co. and Credit Suisse Group AG to advise it, it said.
Imperial Tobacco Group Plc, Europe’s second-biggest tobacco company, dropped 2 percent to 2,012 pence, for the largest decline on the FTSE 100. Bank of America Corp. analysts wrote in a report that fourth-quarter earnings, due on Sept. 21, may disappoint as markets are “soft.”