Most U.K. shares rose, with the FTSE 100 Index climbing in the final minutes of trading as gains in stocks including Standard Chartered Plc and Rio Tinto Group helped offset the Bank of England’s reduced economic outlook.
Standard Chartered Plc jumped 8.6 percent, rebounding from yesterday’s selloff, amid speculation the lender may become a takeover target. Rio Tinto Group rose 2.9 percent after earnings topped analyst estimates. Smiths Group Plc and Serco Group Plc retreated as analysts downgraded the shares.
The benchmark FTSE 100 rose 4.68 points, or 0.1 percent, to 5,845.92 at the close in London for a fourth-day of gains. Of the gauge’s 101 members, 59 rose, while 39 fell. The index had fallen as much as 0.7 percent today. The broader FTSE All-Share Index also advanced 0.1 percent, while Ireland’s ISEQ Index added 0.4 percent.
The Bank of England reduced its forecast for annual gross-domestic-product growth to about 2 percent in two years. That compares with an earlier projection in May of 2.5 percent. It also sees consumer-price growth at about 1.6 percent by then, below its 2 percent goal.
“The outlook for U.K. growth remains unusually uncertain, the BOE said in a statement. “The greatest threat to the recovery stems from the risk that an effective policy response is not implemented sufficiently promptly in the euro area.”
The U.K. economy shrank 0.7 percent in the second quarter, the most in more than three years as the euro-area debt crisis undermined confidence and curbed demand.
The FTSE 100 has still rebounded 11 percent from its June 1 low amid optimism that central banks, including the BOE, will introduce more measures to stimulate growth. The volume of shares changing hands on the gauge today was 16 percent lower than the average of the last 30 days, according to data compiled by Bloomberg.
Standard Chartered rallied 8.6 percent to 1,315.5 pence after yesterday’s 16 percent selloff. Analysts said the lender, which is accused of breaching U.S. money-laundering laws, may receive bids from banks including JPMorgan Chase & Co.
“A large fine and loss of U.S. banking licenses could mark out the company as a takeover target for others hoping for a fast track to an otherwise excellent franchise in the emerging markets,” Jon Kirk, a partner of financials research at Redburn Partners LLP, said in a note to clients on Aug. 7. “JPMorgan is often highlighted as a potential buyer.”
The shares sank yesterday after the lender was accused of violating U.S. money laundering laws over its dealings with Iranian banks. Chief Executive Officer Peter Sands today denied a New York regulator’s claims the lender broke the laws and challenged the accuracy of the watchdog’s report.
Rio Tinto rose 2.9 percent to 3,220 pence after the world’s third-largest mining company reported a 22 percent drop in first-half profit to $5.9 billion. That topped the average analyst estimate of $5.04 billion in a Bloomberg News survey. Profit was boosted by a deferred tax asset of $1 billion after the introduction of Australia’s Mineral Resource Rent Tax on July 1.
Smiths Group dropped 3.4 percent to 1,075 pence after Bank of America Corp. lowered its recommendation for the shares to underperform from neutral, meaning investors should own less shares than are represented in indexes.
The company’s “recent outperformance, end-market issues and an increasing pension deficit are all likely to be near-term headwinds for the stock,” analysts wrote in a note today.
Serco Group lost 2.2 percent to 579 pence after UBS AG reduced its rating for the shares to neutral from buy, citing a “strong run” in the share price this year. The stock had climbed 25 percent through yesterday.
International Consolidated Airlines Group SA, the parent of British Airways, was among the biggest decliners as European carriers dropped, falling 2.1 percent to 153.3 pence.
Airlines fell as Cathay Pacific Airways Ltd. tumbled the most in about three months in Hong Kong after posting an unexpected loss on higher fuel costs, waning premium travel and a slump in freight.
InterContinental Hotels Group Plc fell 2.4 percent to 1,683 pence. The world’s largest provider of hotel rooms surged 6.5 percent to a record high of 1,725 pence yesterday after announcing a $1 billion share-buyback plan.
Cobham Plc tumbled 5.4 percent to 225.7 pence after saying earnings won’t grow in 2012 and that the outlook for the U.S. defense market, the world’s biggest, is “particularly uncertain” this year and next.
Chief Executive Officer Bob Murphy said earnings per share, adjusted for an asset sale, will be similar to last year in 2012, and that full-year profit growth will be lower than in the first half.