U.K. Stocks Rally to One-Month High; Tesco, RBS Climb

The U.K.’s FTSE 100 Index climbed to a one-month high after an unexpected drop in the country’s unemployment and a surge in U.S. new-house construction.

Tesco Plc increased 2.7 percent after UBS AG recommended investors buy shares of Britain’s largest retailer. Royal Bank of Scotland Group Plc rose more 2.2 percent after the lender agreed to leave the U.K.’s Asset Protection Scheme. Rio Tinto Group led mining shares higher, advancing 4 percent.

The FTSE 100 Index rose 40.37 points, or 0.7 percent, to 5,910.91 at the close in London, the highest since Sept. 14. The gauge has rallied 2 percent so far this week bolstered by better-than-forecast U.S. retail and industrial-output data. The FTSE All-Share Index added 0.7 percent today, while Ireland’s ISEQ Index gained 0.2 percent.

“Economic data has helped to limit the downward pressure in the U.S. and Europe,” said Ishaq Siddiqi, market strategist at ETX Capital in London. The U.K. jobs data “is very encouraging and will undoubtedly raise questions about the need for more quantitative easing, but importantly, suggests the U.K. economy is back on track to growth.”

The Office for National Statistics showed jobless claims in the U.K. fell 4,000 in September from the previous month to 1.57 million, boosted by the London Olympics. The median economist estimate in a Bloomberg News Survey called for no change in claims.

A wider measure of unemployment, measured by International Labor Organization methods, declined to 7.9 percent between June and August. Employment surged 212,000 to 29.6 million, the highest since records began in 1971.

Stimulus Debate

The Bank of England said in minutes from its Oct. 3-4 meeting that policy makers were split on the need for more stimulus before next month’s decision on whether to extend their asset-purchase program or end it.

The Monetary Policy Committee had voted 9-0 to keep its bond-purchase target at 375 billion pounds ($605 billion), according to the minutes released today. It was also unanimous in holding the benchmark interest rate at 0.5 percent.

In the U.S., Commerce Department data today showed new-home construction jumped 15 percent in September to an 872,000 annual rate, the most since July 2008 and exceeding all forecasts in a Bloomberg survey of economists.

Tesco, RBS

Tesco gained 2.7 percent to 316.3 pence after UBS raised its recommendation for the retailer to buy from neutral and added the shares to its most preferred list.

UBS analysts Mike Tarrersall and Benjamin Peters cited the company’s “cash-focused” strategy that could see Tesco buy back almost 8 billion pounds of equity and return about 60 percent of market capitalization to investors in cash, including dividends by February 2018.

RBS rose 2.2 percent to 286.1 pence after the lender agreed to leave the Asset Protection Scheme, removing another obstacle for its return to private ownership.

Britain’s biggest taxpayer-owned bank agreed to paid 2.5 billion pounds to the government to insure its most risky assets. RBS was the the only lender in 2009 to join the program which covered potential losses on 282 billion pounds of loans and derivatives.

A gauge of U.K.-listed mining companies climbed 3.5 percent as base metals advanced on the London Metal Exchange.

Rio Tinto rallied 4 percent to 3,184 pence after Agence France Presse reported that the company is planning to cut 30 percent of its workforce in Europe by the end of 2013, citing union official Veronique Roche.

The world’s third-largest mining company employs about 2,700 people in Europe, AFP reported, citing Roche.

BHP Output

BHP Billiton Ltd gained 3.3 percent to 2,014 pence. The world’s largest mining company today said first-quarter iron-ore production was little changed from the previous year at 39.77 million metric tons.

BHP also said it expects China’s growth to fall to about 7 to 8 percent this year and remain at that level for the next decade as the nation becomes a consumer-led economy.

BP Plc rose 3 percent to 448.35 pence after people with knowledge of the matter said the company and its Russian billionaire partners are in talks to sell control of their TNK-BP venture to OAO Rosneft.

The billionaires, represented by the AAR group, are seeking to sell their 50 percent holding to Rosneft for $28 billion, one person said, declining to be identified before a deal is completed. BP is also negotiating to sell at least some of its shares, another person said.

Officials from AAR, Rosneft and BP declined to comment.

Ashtead, 888

Ashtead Group Plc, a U.K. construction-equipment rental company, climbed 3.2 percent to 356.4 pence after U.S. peer United Rentals Inc. reported third-quarter earnings that beat estimates. Analysts at Jefferies Inc. and Seymour Pierce Ltd. also raised their price estimates for Ashtead’s shares by more than 10 percent to 400 pence.

888 Holdings Plc advanced 18 percent to 109 pence, the highest since March 2010, after the online-gambling company said full-year earnings will “significantly” beat market expectations.

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