U.K. Stocks Rise as RBS, Barclays Surge on BOE Lending
Royal Bank of Scotland Group Plc (RBS) and Lloyds Banking Group Plc (LLOY) both jumped more than 4 percent as Bank of England Governor Mervyn King said they will provide billions of pounds of cheap emergency aid to the industry. Mining companies also advanced amid optimism that central banks around the world will take coordinated action to support growth.
The FTSE 100 rose 0.2 percent to 5,478.81 at the close in London, extending its weekly advance to 0.8 percent. Gains were limited today as investors awaited the outcome of this weekend’s elections in Greece. The broader FTSE All-Share Index gained 0.4 percent and Ireland’s ISEQ Index rose 2.2 percent.
“Given there is so much uncertainty, markets do like the idea of any sort of decisive action by policy makers, let alone anything that is stimulative,” said Richard Hunter, head of equities at Hargreaves Lansdown Plc in London. “As a result, banks have been marked higher.”
U.K. stocks declined yesterday as Spain’s borrowing costs surged to a euro-era record after Moody’s Investors Service downgraded the nation’s credit rating. The FTSE 100 (UKX) has dropped 8.2 percent from its 2012 high in March.
Almost 10 million Greeks will vote on June 17. The country’s president called the poll after the previous election on May 6 failed to produce a coalition of parties capable of forming a majority government.
U.K. Lenders Surge
A gauge of U.K. banks rallied to a one-month high after the BOE unveiled a “funding-for-lending” program that will allow lenders to swap assets with the central bank in return for money they can loan to companies and households. The U.K. Treasury said a 5 percent increase in lending would inject about 80 billion pounds ($125 billion) into the economy.
The BOE will also activate an unused facility to put at least 5 billion pounds a month into the financial system to bring down borrowing costs.
RBS surged 7.9 percent to 247.6 pence, Lloyds added 5.2 percent to 31.3 pence and Barclays Plc (BARC) advanced 4.2 percent to 200.8 pence.
Mining companies climbed with base metal prices as central banks from the U.K. to Japan and Canada increased their warnings about the threat to world financial markets should the euro area fail to contain its debt crisis. They spoke as Group of 20 leaders prepare to meet in Mexico next week amid the weakest international economy since 2009.
Reuters reported that central banks are preparing for coordinated action to provide liquidity if needed after Greece’s election this weekend.
BHP Billiton Ltd. (BHP), the world’s largest mining company, gained 1.3 percent to 1,800 pence. Rio Tinto Group, the third largest, added 2.4 percent to 2,935 pence and Vedanta Resources Plc increased 6.3 percent to 960 pence.
Taylor Wimpey Plc (TW/) led housebuilders higher, climbing 3.9 percent to 46.16 pence. Persimmon Plc (PSN) advanced 2.2 percent to 580 pence and Barratt Developments Plc (BDEV) surged 6 percent to 133.4 pence.
U.K. house prices rose the most in nine months in May, according to Acadametrics Ltd. The average price in England and Wales climbed 0.5 percent to 223,207 pounds from April, Acadametrics and LSL Property Services Plc said in a report in London today. From a year earlier, values gained 1.9 percent.
Premier Foods Plc (PFD) surged 9.4 percent to 87.5 pence after the maker of Oxo cubes and Ambrosia custard agreed to sell its pickles unit for 41 million pounds to help pay down debt.
Aggreko Plc (AGK) dropped 4.4 percent to 2,066 pence after the world’s largest supplier of mobile power supplies said first- half underlying revenue will rise about 15 percent from a year earlier and trading profit will increase about 20 percent. Analysts at Peel Hunt and Investec said some investors may have predicted higher growth.
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