U.K. Stocks Advance Before Euro-Area Meeting on Debt Crisis

Nov. 29 (Bloomberg) -- U.K. stocks rose, for the biggest three-day rally in the benchmark FTSE 100 Index in seven weeks, as investors awaited the outcome of a meeting of euro-area finance ministers in Brussels on the region’s debt crisis.

Randgold Resources Ltd. led advances as analysts recommended buying shares in the gold producer. GKN Plc rose amid bid speculation. Lloyds Banking Group Plc and Rio Tinto Group limited gains.

The benchmark FTSE 100 Index increased 24.24, or 0.5 percent, to 5,337 at the close in London. The gauge has jumped 4.1 percent in the last three days, the biggest advance since Oct. 10. The FTSE All-Share Index rose 0.6 percent today. Ireland’s ISEQ Index climbed 0.5 percent.

Stocks rallied around the world yesterday and the FTSE 100 gained 2.9 percent, after draft guidelines showed the euro area’s rescue fund may insure as much as 30 percent of sovereign-bond issues.

“Yesterday’s rally was given impetus by hopes that the euro zone is lurching towards a deal,” said Chris Beauchamp, a market analyst at IG Index. “Investors now hope that ministers will build on this during the afternoon in order to sustain the rally beyond a mere dead-cat bounce.”

U.K. stocks swung between gains and losses today as Chancellor of the Exchequer George Osborne said U.K. economic growth will be slower than forecast this year and the next, forcing the government to borrow more and extend spending cuts to narrow the budget deficit.

Finance ministers from the 17-member monetary union face increasing pressure to step up their response to the debt crisis that sent Greece to the brink of a default and borrowing costs in Italy and Spain higher. They will debate using their bailout fund, the European Financial Stability Facility, to insure sovereign debt with guarantees.

Increasing Threat

Bank of England Governor Mervyn King warned lawmakers yesterday that the U.K. is being “increasingly threatened” by the euro-area crisis, and authorities must act if it continues to escalate.

“What we have to do is to be ready and prepared with contingency plans and to make sure that as far as possible our banking system is as robust as possible to withstand whatever shocks that come from the euro zone,” he said at a Parliament committee meeting in London yesterday. There are “early signs” of a credit crunch.

Randgold Resources climbed 5.8 percent to 6,600 pence, paring yesterday’s 7.9 percent selloff. Investec Plc raised its recommendation for the gold producer to “buy” from “hold,” saying the recent decline is a buying opportunity.

GKN rallied 4.2 percent to 184.5 pence after London Evening Standard reported Quest Global Engineering may be interested in bidding for the U.K. company. The newspaper did not say where it got the information.

Bank Shares Drop

Lloyds Bank Group Plc slid 2.1 percent to 23.18 pence, HSBC Holdings Plc declined 0.5 percent to 486.55 pence and Royal Bank of Scotland Group Plc slipped 1.1 percent to 19.52 pence.

A gauge of bank stocks yesterday rallied 5 percent as European borrowing costs declined before today’s meeting of finance ministers.

Rio Tinto Group led mining shares lower, falling 0.8 percent to 3,138.5 pence as copper retreated in London. Antofagasta Plc dropped 0.9 percent to 1,084 pence and Anglo American Plc declined 0.4 percent to 2,308.5 pence.

Elsewhere, IG Group Holdings Plc climbed 9.3 percent to 474 pence after the company said it continues to experience high levels of client activity. IG forecast first-half revenue in excess of 193 million pounds ($302 million).

Balfour Beatty Plc rose 5.1 percent to 241.7 pence, its steepest rise in more than a month, after winning a 104 million-pound contract from Qatar’s public works department.

Taylor Wimpey Plc, the U.K.’s second-largest homebuilder by volume, gained 3.6 percent to 38.32 pence. U.K. house prices rose for a third month in November, according to Nationwide Building Society. Persimmon Plc increased 2.7 percent to 490.1 pence.

Mouchel Group Plc surged 46 percent to 17.5 pence, the biggest jump since at least 2002 according to Bloomberg data. The support-services company is scheduled to report earnings tomorrow. The Telegraph reported Nov. 26 the company is in talks with lenders about its debt.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net

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