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U.K. Stocks Rise to 13-Year High on Bernanke Testimony

May 22 (Bloomberg) -- U.K. stocks advanced, extending their highest level in 13 years, as Federal Reserve Chairman Ben S. Bernanke said tightening monetary policy too soon would endanger U.S. economic recovery.

Antofagasta Plc and Glencore Xstrata Plc led a rally in mining shares, each gaining at least 3.5 percent. Lloyds Banking Group Plc rose 2.3 percent after saying it doesn’t need to raise equity to meet additional capital requirements. ARM Holdings Plc dropped 1.4 percent after reports that Samsung Electronics Co. Ltd. may choose another vendor to provide a processor.

The FTSE 100 Index climbed 36.4 points, or 0.5 percent, to 6,840.27 at the close in London. The benchmark has surged 16 percent this year as central banks maintained stimulus measures. The broader FTSE All-Share Index also added 0.5 percent today, while Ireland’s ISEQ Index was little changed.

“The statement by Bernanke is being read as bullish by the markets,” said Gerard Lane, a strategist at Shore Capital in Liverpool, England. “He didn’t mention anything about an exit. If by tightening we’re talking about the Fed putting the brakes on quantitative easing, that won’t happen. But if the labor market carries on this pace of growth, then at some point, they’ll ease off the gas pedal.”

The volume of shares changing hands in FTSE 100 companies was 26 percent higher than the average of the past 30 days, according to data compiled by Bloomberg.

Recovery Concern

Stocks rose, erasing losses of as much as 0.3 percent, amid optimism the Fed will continue stimulus measures after Bernanke said said economic growth continues to be hampered by a high jobless rate and government spending cuts.

“A premature tightening of monetary policy could lead interest rates to rise temporarily but would also carry a substantial risk of slowing or ending the economic recovery and causing inflation to fall further,” Bernanke said in a testimony before a Joint Economic Committee of Congress.

In the U.K., Bank of England Governor Mervyn King was defeated for a fourth month in his bid to expand stimulus, the minutes of the central bank’s May 8-9 meeting showed. Six members of the Monetary Policy Committee voted to keep quantitative easing at 375 billion pounds ($568 billion) this month. King, David Miles and Paul Fisher backed increasing it by 25 billion pounds.

A report showed U.K. retail sales unexpectedly fell in April. Sales including fuel declined 1.3 percent from March, the Office for National Statistics said in London. The median forecast in a Bloomberg News survey called for a 0.1 percent increase.

Commodity Producers

Antofagasta jumped 3.9 percent to 1,002 pence and Glencore Xstrata climbed 3.5 percent to 351 pence. A gauge of mining shares in the FTSE 350 Index rallied 1.6 percent.

Lloyds gained 2.3 percent to 62.96 pence as Britain’s second-largest state-owned lender said it doesn’t need to raise more equity to reduce a capital deficit, following talks with the Prudential Regulation Authority.

The PRA, a unit of the Bank of England that took over from the Financial Services Authority, is informing lenders how much capital each bank must raise to meet a 25 billion-pound shortfall in the industry by the end of the year.

Barclays advanced 3.3 percent to 333.85 pence and Royal Bank of Scotland Group Plc increased 2.2 percent to 349.6 pence.

M&S, ARM

Marks & Spencer Group Plc added 1.6 percent to 475.2 pence, the highest price since January 2008, as Banco Santander SA raised its recommendation on the shares to hold from underweight and Barclays increased its 12-month price estimate on the shares by 9 percent to 350 pence.

The U.K.’s biggest clothing retailer yesterday reported annual profit that beat analysts’ estimates and said it will reduce capital spending through 2015.

ARM declined 1.4 percent to 1,050 pence after websites including Tech Radar and Digital Trends reported Samsung may choose Intel Corp.’s Atom processor for its Galaxy Tab 3 10.1 model, after previously using ARM’s chips in its mobile devices.

Kazakhmys Plc dropped 6 percent to 343.3 pence, its biggest loss in a month, as UBS AG cut its recommendation on the shares to neutral from buy. Prospects for a bid offer for Eurasian Natural Resources Corp., of which Kazakhmys owns 26 percent, have deteriorated, UBS wrote in a note.

ENRC, the metals producer being investigated by the U.K.’s Serious Fraud Office, yesterday rejected an offer from a consortium of buyers. The offer valued ENRC at about $4.96 billion at the end of last week, an independent committee set up by ENRC’s board said. The offer was too low, UBS wrote.

Wm Morrison Supermarkets Plc declined 2.3 percent to 282.6 pence after a term sheet showed UBS placed 103 million shares on behalf of an institutional seller at 280 pence each.

To contact the reporter on this story: Namitha Jagadeesh in London at njagadeesh@bloomberg.net

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

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