U.K. Stocks Gain on China Speculation; Barclays Declines

U.K. stocks climbed for a third day, led by mining companies, amid speculation that China will cut banks’ reserve requirements to spur growth in the world’s second-largest economy.

Vedanta Resources Plc led metal producers higher, rallying 6.1 percent, after Morgan Stanley recommended the shares. Meggitt Plc rose after UBS AG upgraded the engineering company. Barclays Plc erased gains in the final hour of trading as the lender’s top three executives resigned amid a deepening dispute with the Bank of England.

The FTSE 100 Index gained 47.09, or 0.8 percent, to 5,687.73 at the close in London. The gauge jumped to its highest level in eight weeks yesterday as measures of manufacturing from China to the U.K. and the euro area exceeded economists’ forecasts. The broader FTSE All-Share Index also advanced 0.8 percent today.

“Support is coming once again out of China today,” said Markus Huber, head of German sales trading at ETX Capital in London. “Expectations are continuing to grow that there will be more monetary stimulus in the near future.”

The volume of shares traded on the FTSE 100 companies was 15 percent lower than the average of the last 30 days, data compiled by Bloomberg show.

Ireland’s ISEQ Index gained 0.9 percent today. The sixth day of increase marked the gauge’s longest rally this year as the government announced plans to sell government debt for the first time since September 2010.

China Stimulus

Mining companies climbed with copper as the China Securities Journal, a newspaper sponsored by the official Xinhua News Agency, said the time is ripe for China to cut banks’ reserve requirements as slowing inflation gives more room for easing to stabilize growth.

Separately, Shanghai Securities News reported on its website that China may cut reserve requirement ratio three more times in 2012, each by 0.5 percent. The newspaper cited a development report released by the China Banking Association.

Vedanta Resources rallied 6.1 percent to 961 pence as Morgan Stanley resumed its overweight recommendation for the copper producer, the equivalent of a buy rating. Analysts cited the company’s “strong growth pipeline” and ongoing talks on minority buyouts.

Commodity Supply

Morgan Stanley also said copper, iron-ore and gold prices will be supported by limited supply conditions, relatively resilient demand and potential upside from rising Chinese consumption in the second half.

BHP Billiton Ltd., the world’s largest mining company, gained 2.2 percent to 1,870 pence and Rio Tinto Group increased 3.2 percent to 3,157 pence as Morgan Stanley also reiterated its overweight recommendation for both companies.

Meggitt advanced 1.9 percent to 395.6 pence after UBS upgraded the shares to buy from neutral saying the aerospace engineering company may be a takeover candidate.

Barclays erased gains in the final hour of trading, falling 0.8 percent to 167.05 pence. The shares climbed as much as 4.8 percent after Bob Diamond announced his resignation as chief executive officer amid a deepening dispute with the Bank of England about whether the central bank pushed the lender to submit artificially low Libor rates during the financial crisis.

Jerry Del Missier quit as chief operating officer and Chairman Marcus Agius will also leave once he has found a replacement for Diamond, who has worked at the bank for the past 16 years.

Libor Probe

The three are leaving after regulators fined the bank a record 290 million pounds ($455 million) for attempting to rig the London Interbank-Offered Rate. Bank of England Governor Mervyn King and Financial Services Authority Chairman Adair Turner intervened to force Diamond out, the British Broadcasting Corp. reported.

Royal Bank of Scotland Group Plc slid 1.1 percent to 216.5 pence, Lloyds Banking Group Plc gained 1 percent to 31.81 pence and ICAP Plc fell 1.5 percent to 334.8 pence.

RBS, ICAP and Lloyds are among financial companies that are also being investigated by regulators. A total of 18 banks are surveyed.

Aberdeen Asset Management Plc fell 3.7 percent to 255 pence as Credit Suisse Group AG was said to sell part of its stake in the Scottish fund manager to raise as much as 205 million pounds ($322 million), according to two people with knowledge of the transaction.

Credit Suisse placed as many as 80.4 million shares for 245 pence to 255 pence each, a discount of as much as 7.4 percent to the closing price today, said the people who asked not be identified because the process is private.

Elsewhere, Talvivaara Mining Co. sank 13 percent to 148.6 pence after the Finnish nickel miner said it can no longer meet this year’s output target and warned second-quarter earnings will be weakened by lower metal prices.

Avocet Mining Plc dropped 7.6 percent to 71.25 pence. The shares have sunk 53 percent in the last three days as the company cut its 2012 gold-production forecast.

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