U.K. Stocks Advance Rally Most in Three Months; RBS, Lloyds Gain
U.K. stocks rallied the most in three months as concern that Europe’s sovereign-debt crisis will spread eased and a report showed that Chinese manufacturing expanded for a fourth month, boosting raw-material companies.
Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc led bank shares higher after three days of losses. Rio Tinto Group advanced 3.1 percent and Xstrata Plc surged 5.8 percent as metal prices gained. Sage Group Plc climbed the most in 18 months as the U.K.’s largest software maker reported profit that topped estimates.
The benchmark FTSE 100 Index gained 114.23, or 2.1 percent, to 5,642.5 at the 4:30 p.m. close in London, rebounding from yesterday’s lowest level since September. The gauge fell earlier this week after the European Union-led bailout of Ireland failed to reassure investors that the region will contain its sovereign-debt crisis. The FTSE All-Share Index also advanced 2.1 percent today, while Ireland’s ISEQ Index rose 1.5 percent.
“We are bullish on U.K. equities and see decent upside into the end of 2011,” UBS AG strategists Nick Nelson and Karen Olney wrote in a report dated Nov. 30, as they introduced their 6,700 estimate for the end of 2011 for the FTSE 100. That would mark a 19 percent rally from yesterday’s close. “We see valuation and fund flows as strongly supportive.”
Rio Tinto, the world’s third-largest mining company, gained 3.1 percent to 4,207 pence. Xstrata rose 5.8 percent to 1,367 pence as copper, lead, nickel and tin prices increased on the London Metals Exchange.
China’s Purchasing Managers’ Index for November rose to 55.2, the fastest pace in seven months, from 54.7 in October, according to the China Federation of Logistics & Purchasing. The reading beat the 54.8 median forecast of economists in a Bloomberg News survey. A PMI released by HSBC Holdings Plc also jumped.
Sage climbed 5.3 percent to 271 pence as the company said full-year profit increased to 227.3 million pounds ($353.7 million), beating analysts’ estimates for 220 million pounds. Sage generated sales of 1.44 billion pounds. Analysts had predicted sales of 1.43 billion pounds, according to the median of 19 estimates.
Royal Bank of Scotland gained 6.1 percent to 39.9 pence. Lloyds rallied 6 percent to 64.1 pence. Barclays Plc rose 4.6 percent to 268 pence.
The FTSE 350 Banks Index climbed 2.9 percent, the most since Nov. 4, after having fallen for three consecutive days amid concern that the region’s debt crisis would worsen. The gauge climbed as Portugal and Ireland led a decline in the cost of insuring against losses on government and corporate bonds in Europe. Contracts on Belgium, Italy, and Spain also fell from record levels, helping to push down the region’s benchmark index of sovereign swaps from an all-time high.
Prudential Plc climbed 5.5 percent to 599 pence, pacing a rally in U.K. insurers, after saying it plans to double profit from Asia by 2013. Aviva Plc, the U.K.’s second-biggest insurer, rose 4.1 percent to 369.2 pence and Legal & General Group Plc increased 3.5 percent to 94.6 pence.
Thomas Cook Group Plc retreated 4.5 percent to 178 pence. Europe’s second-biggest tour operator posted a full-year loss of 2.6 million pounds as the shutdown of European airspace after a volcanic eruption disrupted the company’s travel business and caused costs to increase.
Numis Securities Ltd. lowered its recommendation for the tour operator to “hold” from “add.”
De La Rue Plc soared 10 percent to 637 pence, the biggest gain in seven years, after the Financial Times cited a BofA Merrill Lynch Global Research report giving the world’s biggest printer of banknotes a “fair value” of as much as 830 pence a share.
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