U.K. Stocks Climb to Highest Since 2008 on U.S. Data

U.K. stocks rallied to their highest level since May 2008 after better-than-expected U.S. housing starts and jobs reports bolstered confidence in the world’s largest economy.

Associated British Foods Plc rallied 3.2 percent after revenue at its budget-clothing business, Primark, surged over Christmas. International Consolidated Airlines Group Plc rose 4.3 percent following a report the company’s Spanish unit has reached an agreement with unions. Rio Tinto Group fell after announcing $14 billion of writedowns and the departure of its chief executive officer.

The FTSE 100 Index added 0.5 percent to 6,132.36 at the close in London, rebounding from an earlier drop of as much as 0.3 percent. The broader FTSE All-Share Index also advanced 0.5 percent today, while Ireland’s ISEQ Index gained 0.5 percent.

“The prospect for global growth continues to look pretty bright making cyclical stocks attractive even if they have already had a strong start to the year,” said Angus Campbell, head of market analysis at Capital Spreads in London. “We’ve also had some encouraging corporate earnings, with finally a bright spot on the retail front in the U.K.”

The FTSE 100 has risen 4 percent this year after U.S. lawmakers agreed to a compromise budget to prevent automatic tax increases and spending cuts from taking effect. The volume of shares changing hands in the gauge’s companies today was 11 percent greater than the average of the last 30 days, according to data compiled by Bloomberg.

Housing Starts

Stocks extended their advance today after a U.S. Commerce Department report showed housing starts increased at an annual pace of 12.1 percent in December, beating the median economist estimate in a Bloomberg survey for an increase of 3.3 percent. A separate release from the Labor Department showed that initial claims for jobless benefits retreated to 335,000 last week from a revised 372,000 the previous week.

AB Foods jumped 3.2 percent to 1,606 pence after the company said the performance of its Primark clothing chain has caused the business to beat its forecasts in the financial year to date. Primark’s revenue surged 25 percent from a year earlier in the 16 weeks ended Jan. 5, the company said in a statement. The sugar unit’s sales increased 12 percent.

Home Retail Group Plc surged 12 percent to 136.6 pence, the biggest gain on the broader All-Share Index. The retailer said full-year earnings will beat estimates because sales accelerated at its Argos catalog chain over Christmas.

Group underlying pretax profit will be about 10 million pounds ($16 million) more than the market consensus of 73 million pounds. Home Retail also said it will have more than 300 million pounds of cash at the end of its fiscal year.

Shorted Stocks

The company is one of the most shorted stocks on the FTSE All-Share with 22 percent of shares out on loan, according to the most recent data from Markit.

Asos Plc gained 1.7 percent to 2,700 pence after the U.K.’s largest online-only fashion retailer reported that total retail sales jumped 41 percent to 78.1 million pounds in December. That compared with growth of 30 percent in the first quarter.

IAG gained 4.3 percent to 211.8 pence after El Pais reported that its Spanish unit Iberia has agreed with unions to keep capacity cuts to less than 14.5 percent. The newspaper cited unidentified participants at the meetings between Iberia and its unions and said an Iberia spokesman declined to comment.

Petropavlovsk Soars

Petropavlovsk Plc surged 8.9 percent to 403.3 pence after the miner of gold in Russia reported a 13 percent increase in output to 710,400 ounces last year. That beat its forecast of 700,000 ounces. The company plans to produce 740,000 to 780,000 ounces this year.

Rio Tinto fell 0.5 percent to 3,439.5 pence. The world’s second-biggest mining company stock earlier tumbled as much as 4.6 percent after saying Tom Albanese will step down as CEO and Sam Walsh, currently the head of Rio Tinto’s most profitable division, will replace him.

Doug Ritchie, who oversaw the A$3.9 billion ($4.1 billion) purchase of Mozambique coal producer Riversdale Mining Ltd. in 2011 will also step down as Rio cuts the value of its coal assets in the East African country by about $3 billion.

The bulk of the writedown will come from Rio’s aluminum businesses, most of which were obtained through Albanese’s $38 billion purchase of Alcan Inc. in 2007. Rio reduced the value of the operations by $8.9 billion last February.

Citigroup Inc. raised its recommendation for the shares following the announcement to buy from neutral.

Aberdeen Asset Management Plc dropped 1.7 percent to 385 pence after reporting a 3.3 percent increase in funds under management to 193.4 billion pounds in the fourth quarter as clients invested in Asia. The stock rose 6.7 percent from the start of the year through yesterday.

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