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U.K. Stocks Advance After China Cuts Interest Rates

June 7 (Bloomberg) -- U.K. stocks advanced as China cut interest rates for the first time since 2008 in an effort to boost lending and growth in the world’s second-largest economy.

Johnson Matthey Plc gained 4.9 percent after posting a 74 percent increase in full-year profit and declaring a special dividend. Tullow Oil Plc added 2.1 percent after it found oil off the shores of Ivory Coast. Burberry Group Plc climbed 5.1 percent after Credit Suisse Group AG upgraded its recommendation on the stock.

The FTSE 100 advanced 1.2 percent to 5,447.79 at the close in London. The gauge has still lost 8.7 percent from its 2012 high on March 16 as concern mounted that Greece will be forced to leave the euro area. The broader FTSE All-Share Index climbed 1.2 percent today. Ireland’s ISEQ Index added 0.4 percent.

The People’s Bank of China said the benchmark one-year lending rate will drop by 0.25 percentage points effective tomorrow. The one-year deposit rate will also drop by 0.25 percentage points, it said.

U.K. stocks rose the most in six months yesterday as the European Central Bank left its benchmark interest rate unchanged and extended its unlimited short-term cash offering until the start of 2013.

The Bank of England held its benchmark rate and asset-purchase target today.

Services Industry

U.K. service industries unexpectedly maintained their pace of growth in May. A gauge based on a survey of purchasing managers remained at 53.3 from April, Markit Economics and the Chartered Institute of Purchasing and Supply said in a report today in London. The median forecast of 27 economists in a Bloomberg News survey was for a decline to 52.4. A measure above 50 indicates expansion.

In the U.S., Federal Reserve Vice Chairman Janet Yellen said slowing job growth and deteriorating financial-market conditions show the U.S. economy “remains vulnerable to setbacks” and may warrant additional monetary stimulus.

The U.S. Labor Department said today first-time claims for jobless benefits fell by 12,000 to 377,000 in the week ended June 2 from a revised 389,000 the prior week that was higher than initially estimated. The median estimate of 49 economists surveyed by Bloomberg News called for 378,000 claims.

Johnson Matthey gained 4.9 percent to 2,304 pence, its biggest increase since February. The producer of a third of all autocatalysts said net income rose to 315.9 million pounds ($489 million) in the 12 months through March. Sales, excluding precious metals, climbed 17 percent to 2.7 billion pounds.

Tullow Oil added 2.1 percent to 1,468 pence. The U.K.-based oil and gas explorer, found oil at its Paon-1X exploration well in the sea near Ivory Coast.

Burberry surged 5.1 percent to 1,392 pence, its biggest gain since November. Credit Suisse raised the stock to outperform, the equivalent of buy, from neutral. The bank set a target price of 1,650 pence.

Anglo American climbed 2 percent to 2,133 pence, while Rio Tinto, the world’s third-largest mining company, increased 4 percent to 3,015 pence. Vedanta Resources Plc surged 2.3 percent to 985.5 pence. A gauge of mining companies surged 2.5 percent for the biggest advance on the Stoxx 600.

Lloyds Banking Group Plc added 3.5 percent to 28 pence as a gauge of London-listed lenders rose to a three-week high. Royal Bank of Scotland Group Plc gained 5.3 percent to 224.40 pence. Barclays Plc gained 2.7 percent to 192.9 pence.

To contact the reporter on this story: Tom Stoukas in Athens at astoukas@bloomberg.net

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

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