Oct. 7 (Bloomberg) -- U.K. stocks gained for a third day after a report showed employers in the U.S. added more jobs than forecast last month, easing concern amid investors that the economic recovery is faltering.
Commodities companies, whose profits are closely tied to growth, led the advance, with Rio Tinto Group rising 1.2 percent. Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc retreated more than 3 percent as Moody’s Investors Service cut the ratings on their debt. Premier Foods Plc plunged 42 percent after saying third-quarter results were “significantly” below forecasts.
The FTSE 100 Index gained 12.14, or 0.2 percent, to 5,303.4 at the 4:30 p.m. close in London. The gauge has rallied 3.4 percent this week as investors speculated policy makers will reach agreement to shield financial institutions from the European debt crisis and as the Bank of England expanded its bond-purchase program. The FTSE All-Share Index added 0.3 percent today, while Ireland’s ISEQ Index rallied 0.5 percent.
“This is a brief respite for equity markets,” said Chris Purdy, a trader at SpreadEx Ltd., in St. Albans, England. “It has provided a solid rally to end what has been a week of unsteady gains. However, once equity investors quit looking at this situation through a monthly employment microscope, they will realize that the bigger picture is still pretty dismal.”
U.S. payrolls climbed by 103,000 workers after a revised 57,000 increase the prior month that was more than originally estimated, Labor Department data showed. The median forecast in a Bloomberg News survey called for a rise of 60,000. The gain reflected the return to work of 45,000 telecommunications employees. The jobless rate held at 9.1 percent.
The slump in stocks last month dragged the price-earnings ratio on the FTSE 100 to 8.9 times the estimated profits of its constituent companies, according to data compiled by Bloomberg. That compares with the average multiple of 11.4 during the past five years, the data show.
“Current equity valuations are consistent with a material strengthening in equity returns over the medium to longer term,” Darren Winder, an equity strategist at Oriel Securities in London, wrote in a report. “The outlook for profits is, in our view, considerably more favorable than implied by current valuations.”
The FTSE 100 slumped 14 percent in the third quarter, its biggest drop since 2002, amid concern Greece’s debt woes will spread to other countries in the region and that the global economy is stalling.
Rio Tinto Drops
Rio Tinto, the world’s second-largest mining company, advanced 1.2 percent to 3,164 pence. Vedanta Resources Plc, the largest copper producer in India, jumped 4.2 percent to 1,160 pence. Xstrata Plc increased 2.7 percent to 910 pence. Copper, lead and tin rose in London.
RBS, the U.K.’s biggest government-controlled bank, fell 3 percent to 23.62 pence and Lloyds retreated 3.4 percent to 34.66 pence. Lloyds TSB Bank Plc, Santander UK Plc and Co-Operative Bank Plc had their ratings lowered one step by Moody’s, while RBS and Nationwide Building Society were cut two levels.
Premier Foods, the U.K.’s biggest food maker, tumbled 42 percent to 5.8 pence, the largest decline since its initial share sale in 2004. Third-quarter earnings were “significantly below” management forecasts, with sales falling 3.6 percent during the period, the company said.
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