U.K. Stocks Advance After Fed Minutes, Trimming Monthly Slump
U.K. stocks advanced for a second day after the Federal Reserve said some policy makers wanted to add to stimulus measures and factory orders topped forecasts in the U.S.
BHP Billiton Ltd. (BHP) and Rio Tinto Group rallied more than 3 percent as rising metal prices boosted the earnings outlook for the world’s biggest mining companies. Smith & Nephew Plc (SN/) soared 4.9 percent after the Daily Mail reported that Biomet Inc. may bid 900 pence a share for the maker of artificial knees and hips. Bwin.Party Digital Entertainment Plc soared 14 percent.
The FTSE 100 Index (UKX) gained 125.87, or 2.4 percent, to 5,394.53 at the 4:30 p.m. close in London. The gauge has slumped 7.2 percent in August, its biggest monthly drop since February 2009, as concern that the global economic recovery is faltering wiped more than $400 billion off the value of U.K. shares. The FTSE All-Share Index rose 2.3 percent today, while Ireland’s ISEQ Index advanced 3.6 percent.
Fed policy makers debated ways to invigorate the recovery and hiring at their meeting earlier this month, according to minutes released after European markets closed yesterday. That potentially lays the groundwork for action, such as a third round of asset purchases, also known as QE3, at the Federal Open Market Committee’s September gathering. Several members of the FOMC favored a “more substantial move” at the Aug. 9 meeting beyond the pledge adopted by the panel to hold interest rates at record lows for the next two years.
“It’s a buying opportunity,” said Virginie Maisonneuve, head of global equities at Schroder Investment Management Ltd., which manages $328.7 billion. “If needed, we’ll have a QE3 or something of that sort in the U.S. to help extend this period of fragility so that we don’t go back into a recession. I don’t think it’s a recession at this point.”
U.S. companies added 91,000 workers this month, a report from ADP Employer Services showed today. The median forecast of economists surveyed by Bloomberg News called for an advance of 100,000. The release came two days before the Labor Department’s monthly jobs report, which is forecast to show payrolls climbed by 70,000 in August after an increase of 117,000 in July.
BHP Billiton and Rio Tinto rose 3.1 percent to 2,106 pence and 3.5 percent to 3,802 pence, respectively, as aluminum, copper, nickel, tin and zinc all advanced on the London Metal Exchange. The FTSE 350 Mining Index fell 9.9 percent in August.
“A lot of materials stocks and industrial stocks have been beaten down in the last few weeks on really what is a crisis of confidence,” said Schroder’s Maisonneuve. “It’s very wise to buy on the dip because those are really cheap stocks,” she said in a Bloomberg Radio interview with Tom Keene.
U.S. Factory Orders
Orders placed with U.S. factories rose in July by the most in four months, boosted by demand for motor vehicles and aircraft that more than made up for a decrease in business equipment.
Smith & Nephew surged 4.9 percent to 625.5 pence for the biggest gain in more than seven months. The Daily Mail, the Independent and the Guardian newspapers cited speculation that the company may receive a bid.
Jon Coles, a spokesman for Smith & Nephew at Brunswick Group in London, declined to comment.
Bwin.Party Digital soared 14 percent to 125.3 pence after reporting first-half earnings before interest, taxes, depreciation and amortization that beat analysts’ estimates.
Tesco Plc (TSCO) advanced 3.8 percent to 378.6 pence. Britain’s largest retailer plans to sell its 129-store Japanese unit because it cannot build a “sufficiently scalable business” in the country eight years after entering the market.
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