U.K. Stocks Advance for Fourth Day; Invensys, ITV Rally
U.K. stocks increased for a fourth day, extending a six-week high, amid speculation the Federal Reserve may expand support for the economy and as Bank of England policy makers said more stimulus is likely.
Invensys Plc surged 28 percent after the company was said to be evaluating options, including a sale. ITV Plc (ITV) climbed 3 percent amid reports that a private-equity company might be interested in acquiring the broadcaster. Aer Lingus Group Plc soared 15 percent in Dublin after Ryanair Holdings Plc (RYA) said it will make another attempt to buy the Irish airline. Kesa Electricals Plc (KESA) sank 5 percent after the retailer’s profit fell.
The FTSE 100 Index rose 35.98 points, or 0.6 percent, to 5,622.29 at the close of trading in London, the highest since May 4. The gauge has still fallen 5.8 percent from its 2012 high on March 16 as concern mounted that Greece will leave the euro area. The broader FTSE All-Share Index advanced 0.7 percent today, while Ireland’s ISEQ Index slipped 0.3 percent.
“As the global economy teeters on the brink, and the euro- zone crisis festers away in the background, the hope for many is that Helicopter Ben and his band of policy makers at the Fed will unleash a new round of stimulus, or at the very least tweak the language of their statement to make it more accommodative,” Chris Beauchamp, a market analyst at IG Index in London, wrote in e-mailed comments. “We had an appetizer this morning when the Bank of England published the minutes of its latest policy meeting.”
Fed Chairman Ben S. Bernanke and fellow policy makers will expand Operation Twist beyond $400 billion to spur growth and buy protection against a worsening sovereign-debt crisis in Europe, according to a Bloomberg News survey of economists.
Fifty-eight percent of respondents in a June 18 poll said the Fed will prolong the program, which seeks to lower borrowing costs by extending the average maturity of the securities in the central bank’s portfolio. The current plan ends this month.
The Federal Open Market Committee ends its two-day meeting today with a statement scheduled for release at 12:30 p.m. in Washington. Sixty percent of the economists surveyed said the Fed probably won’t start a third round of large-scale bond purchases, also known as quantitative easing.
Bank of England Governor Mervyn King and three other policy makers were overruled in a push to expand the bank’s bond- purchase program as a majority said more stimulus was likely to be needed to address risks from the euro crisis, according to minutes of its June 6-7 meeting published today.
The Monetary Policy Committee voted 5-4 to keep its bond- purchase target at 325 billion pounds ($511 billion). Most MPC members “judged that some further economic stimulus was either warranted immediately or would probably become warranted to meet” their 2 percent inflation target.
Euro-area leaders at the Group of 20 summit in Mexico yesterday pledged to take “all necessary policy measures” to defend the currency union. The leaders of the world’s 20 biggest economies endorsed a road map for tighter integration to cut borrowing costs and prevent further economic damage.
Antonis Samaras, leader of Greece’s New Democracy party, was sworn in as prime minister today after Greek political leaders agreed on a coalition that will seek relief from austerity measures tied to international loans.
New Democracy, which won a June 17 election with almost 30 percent of the vote, will join forces with the socialist Pasok party, which finished third, and the sixth-place Democratic Left. They will hold 179 seats in the 300-member parliament, ending a period of political limbo that began with an inconclusive May 6 election.
Invensys (ISYS) rallied 28 percent to 257 pence, the biggest gain since 2001. The British maker of rail signaling and industrial automation systems is evaluating options including a sale after Emerson Electric Co. expressed interest in buying some or all of the company, said people familiar with the situation.
Emerson is mainly interested in Invensys’s Foxboro unit, which makes meters and control systems, and not the rail unit, said one of the people, who asked not to be identified as talks are private. Still, Emerson would consider a deal for the whole company to get the Foxboro business, that person said.
ITV climbed 3 percent to 76.5 pence, its highest level this month. Newspapers including the Financial Times and the Guardian reported speculation that the media company might be a takeover target for a private-equity company. ITV spokeswoman Mary Fagan declined to comment.
“I can easily justify and rationalize why it would be attractive to a private-equity buyer,” said Alex DeGroote, an analyst at Panmure Gordon in London. “The probability of such a sale however is low. Execution and borrowing is tough in this environment.”
Aer Lingus (AERL) jumped 15 percent to 1.09 euros in Dublin trading as Ryanair, Europe’s biggest discount airline, said it will make an offer that values the carrier at 694 million euros ($883 million).
Ryanair intends to make an all-cash bid of 1.30 euros a share. It already holds a 29.8 percent stake acquired in 2006 and 2007. Aer Lingus said investors should take no action.
Sage Group Plc (SGE), the U.K.’s biggest software maker, rose 5.5 percent to 267.5 pence, gaining for a fourth consecutive day after purchasing a controlling stake in Folhamatic to enter Brazil for the first time.
Aviva Plc (AV/), an insurer, climbed 4.7 percent to 279.1 pence. The European Union is considering phasing in new capital rules for the life insurance industry over seven years, easing the burden on insurers who had criticized the changes.
The European Commission is considering the change as it negotiates with insurers and members of the European parliament about the transition from the current Solvency I regime to Solvency II rules, Karel van Hulle, the EC’s head of pension and insurance, said today.
Kesa Electricals slid 5 percent to 52.5 pence, the biggest drop in more than a week. The owner of the Darty electronics chain in Europe said profit slumped 42 percent and cut its dividend as tough conditions across France, its largest market, weighed on sales of televisions.
Home Retail Group Plc (HOME), the operator of retail stores, slid 5.3 percent to 87 pence after yesterday surging 24 percent. The stock was cut to neutral from overweight at HSBC Holdings Plc, meaning investors should no longer hold more of the shares than are represented in equity benchmarks.
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