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U.K. Stocks Rise Amid Optimism Over U.S. Debt-Limit Talks

Oct. 11 (Bloomberg) -- U.K. stocks climbed for a second day, turning a weekly loss for the benchmark FTSE 100 Index into a gain, as U.S. lawmakers moved closer to a deal to avoid a potential sovereign default for at least a month.

Royal Mail Group Ltd. surged 38 percent on its first day of conditional trading. Standard Life Plc advanced 2.6 percent after JPMorgan Chase & Co. added the insurer to a list of recommended stocks. Whitbread Plc added 3.1 percent after Citigroup Inc. raised the owner of Premier Inn budget hotels and Costa coffee shops to buy.

The FTSE 100 rose 56.7 points, or 0.9 percent, to 6,487.19 at the close in London, its highest price since Sept. 27. The gauge added 0.5 percent this week as U.S. House Republicans proposed a short-term increase in the debt ceiling and optimism grew that Janet Yellen, nominated to head the Federal Reserve, won’t rush to withdraw stimulus. The broader FTSE All-Share Index also climbed 0.8 percent today, while Ireland’s ISEQ Index dropped 0.2 percent.

“With Yellen in place now and a debt extension looking ever more likely, the markets have nothing holding them back from a moderate move upwards by the end of the year,” Alex Neil, head of equity and derivatives trading at EFG Bank in Geneva, said in an interview. “I worry that if U.S. government talks go on too long, it could weigh on short-term sentiment.”

President Barack Obama met House Republican leaders at the White House yesterday after Speaker John Boehner proposed a short-term increase that would extend the deadline for a solution to Nov. 22. Without congressional action, the government will exhaust its $16.7 trillion borrowing authority on Oct. 17. The government shut down partially Oct. 1 after lawmakers failed to approve a budget.

Royal Mail

Conditional trading in Royal Mail began in London today. The shares surged 38 percent to 455 pence. The U.K. government said institutional investors that bid for more than 20 times the shares available for sale to them, will get 67 percent of the stock in the initial public offering, down from the planned allocation of 70 percent. The remaining 33 percent will go to small retail investors. The IPO raised 1.7 billion pounds ($2.7 billion).

Standard Life advanced 2.6 percent to 355.5 pence. JPMorgan added the insurer to a list of recommended stocks, saying that any potential weakness in flows for the Global Absolute Returns Strategies fund could be partly offset by flows into non-GARS funds like MyFolio.

Whitbread added 3.1 percent to 3,210 pence. Citigroup raised its recommendation for the stock to buy saying improved economic sentiment in Europe will lead to upgrades of earnings estimates. Whitbread has rallied 31 percent so far this year.

Commodity Producers

A gauge of U.K.-listed miners climbed 1.8 percent. Anglo American Plc added 2.4 percent to 1,512 pence.

XP Power Ltd. rallied 12 percent to 1,575 pence,its highest price since July 2011. The electrical-equipment maker said revenue in the third quarter has climbed 11 percent compared with the same period last year.

Howden Joinery Group Plc jumped 4.5 percent to 308.5 pence, the highest since at least July 1992. Shares of the maker of fitted kitchens have surged 78 percent this year compared with the FTSE All-Share gauge’s 12 percent advance. Travis Perkins Plc, a builders merchant, climbed 3.3 percent to 1,678 pence.

Croda International Plc declined 4.8 percent to 2,477 pence. The world’s second-largest maker of cosmetics ingredients was cut to hold from buy at Liberum Capital Ltd., which cited valuation. The stock now trades at 18.9 times its earnings in the past year, compared with the five-year average of 17.6 times.

Chemring Group Plc tumbled 23 percent to 220 pence, for its biggest drop since April 1997. The supplier of missile-avoidance equipment for combat jets said production snags and currency shifts will hurt earnings this year, with political turmoil holding back 2014 results.

Talvivaara Mining Co. plunged 7.7 percent to 6.33 pence, falling for the six straight day to the lowest price since May 2007 when it sold shares to the public. Bank of America Corp. cut the Finnish nickel maker to neutral from buy today, after the company said yesterday it needs to raise funds for the second time in a year.

The volume of shares changing hands on FTSE 100-listed companies was 19 percent lower than the average of the past 30 days, data compiled by Bloomberg showed.

To contact the reporter on this story: Inyoung Hwang in London at ihwang7@bloomberg.net

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

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