U.K. stocks climbed, with the FTSE 100 Index rebounding from a one-month low, after a Federal Reserve official said the U.S. economy isn’t strong enough to justify a reduction in stimulus measures.
Rentokil Initial Plc rose the most in almost eight weeks after a report that private-equity investor Clayton Dubilier & Rice LLC is considering combining the company’s office-maintenance unit with that of Balfour Beatty Plc. Cobham Plc dropped 4.6 percent as a shareholder sold a 3.6 percent stake in the maker of defense and aerospace equipment.
The FTSE 100 advanced 33.46 points, or 0.5 percent, to 6,558.58 in London. The gauge yesterday declined to the lowest level since May 3 amid speculation the Fed would start to taper its bond-buying program if the economy improved. The broader FTSE All-Share Index also also added 0.5 percent today, while Ireland’s ISEQ gained 0.4 percent.
“The market is perhaps too quickly discounting an end to quantitative easing,” Johan Jooste, chief market strategist at Merrill Lynch Wealth Management in London, said. “Although the U.S. economy is improving, both unemployment and inflation remain below Fed targets. The growing market belief in a continued economic recovery -- however stuttering in some regions -- should continue to provide enough impetus to equity markets.”
The volume of shares changing hands in companies listed on the FTSE 100 was 26 percent lower than the average of the past 30 days, according to data compiled by Bloomberg.
In the U.S., Fed Bank of Atlanta President Dennis Lockhart, who doesn’t hold a policy vote this year, said officials at the central bank are committed to continuing stimulus measures.
“To the extent that the markets are seeing mixed messages, it simply reflects the debate that’s going on among the colleagues on the Federal Open Market Committee,” Lockhart said in a Bloomberg Television interview. “The bigger picture is that any adjustment is not a major policy shift.”
U.K. construction returned to growth last month, for the first time since October, a report showed today. An index of building activity rose to 50.8 from 49.4 in April, Markit and the Chartered Institute of Purchasing and Supply said. Economists had forecast a reading below 50, the dividing line between expansion and contraction.
Separately, UBS AG raised its year-end target for the FTSE 100 to 7,000, from its earlier prediction of 6,300, according to a note to clients.
“An improving growth backdrop should help cyclical sectors to outperform, especially in the context of more attractive valuations and improving relative earnings momentum,” strategist Matthew Gilman wrote.
Rentokil rose 2.6 percent to 90.75 pence, for its biggest increase since April 10. Clayton Dubilier & Rice is considering buying the pest-control provider’s Initial Facilities unit and combining it with Balfour Beatty’s WorkPlace, the Financial Times reported, citing four people familiar with the matter.
GKN Plc rallied 5.1 percent to 313.4 pence, the largest advance since July 2012. UBS raised its price estimate on the stock to 350 pence, from 275 pence, reiterating a buy recommendation for the supplier of parts to aircraft makers.
HSBC Holdings Plc advanced 1.9 percent to 731.9 pence, for the largest contribution to the gains on the FTSE 100. Goldman Sachs Group Inc. reiterated its “conviction buy” rating for Europe’s biggest bank. HSBC is poised to beat consensus estimates for earnings through 2016, as well as increasing dividend payments and share buybacks, Goldman Sachs said.
Cobham Plc, the world’s largest maker of airborne refueling kits, tumbled 4.6 percent to 272.9 pence. An investor, who was not named, was sold 39.1 million shares at 273.5 pence to market price, according to terms obtained by Bloomberg News.
Wolseley Plc, the distributor of heating and plumbing products, lost 6.3 percent to 3,145 pence, the biggest slump in three years. Comparable sales in France dropped 9.2 percent in the third-quarter from a year ago as construction remained weak, the company said today.