U.K. Stocks Gain as Draghi Pledges to Preserve Euro
U.K. stocks rebounded from a four-day decline after European Central Bank President Mario Draghi said the lender will act to preserve the euro amid surging bond yields for the currency zone’s most-indebted members.
Unilever gained 5.4 percent after posting second-quarter sales that exceeded analysts’ estimates. Rolls-Royce Holdings Plc (RR/) jumped 6.7 percent after reporting first-half profit that beat projections. Royal Dutch Shell Plc (RDSA) dropped 2.3 percent after saying second-quarter net income fell more than predicted.
The FTSE 100 Index (UKX) surged 74.84 points, or 1.4 percent to 5,573.16 at the close in London, its biggest rally since June 29. The gauge tumbled 3.8 percent over the past four days amid concern the euro area’s sovereign-debt crisis is worsening and as a report showed the U.K. economy shrank for a third quarter. The broader FTSE All-Share Index also added 1.4 percent today, while Ireland’s ISEQ Index advanced 2.3 percent.
“Draghi’s comments about high yields and the fact that they curtail the transmission of monetary policy is crucial,” Derek Halpenny, European head of global markets research at Bank of Tokyo-Mitsubishi UFJ Ltd., said in a Bloomberg Television interview. “What the markets are looking for, given these comments, is for words to be backed up by action. The markets are bracing for some reactivation and actual buying in the secondary bond market.”
Draghi said that ECB policy makers will act to preserve the euro and counter rising bond yields in the 17-nation currency bloc.
“To the extent that the size of these sovereign premia hamper the functioning of the monetary-policy transmission channel, they come within our mandate,” Draghi said during a speech in London today. “We have to cope with the financial fragmentation, address these issues. Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.”
Spanish policy makers have called on the ECB to do more to staunch the crisis as yields on the country’s benchmark bonds rose to euro-era records this week.
In the U.K., 12 companies in the FTSE 100 reported their earnings today. Of the 166 companies listed in the U.K. that have posted half-yearly results this earnings season, 97, or 58 percent, have beaten analysts’ estimates, according to data compiled by Bloomberg.
The volume of shares changing hands on the FTSE 100 today was 9.5 percent higher than the average of the last 30 days, according to data compiled by Bloomberg.
Unilever climbed 5.4 percent to 2,256 pence after saying underlying revenue rose 5.8 percent in the second quarter, topping the average estimate of 32 analysts surveyed by the company for a 4.8 percent increase.
Rolls-Royce jumped 6.7 percent to 885 pence after saying first-half underlying pretax profit increased to 637 million pounds ($999 million). That exceeded the average analyst prediction of 617 million pounds.
British Sky Broadcasting Group Plc (BSY) added 3.1 percent to 706.5 pence as the U.K.’s largest pay-TV broadcaster posted a full-year operating profit that beat analyst projections and said it will buy back 500 million pounds of shares.
SABMiller Plc (SAB) advanced 3.9 percent to 2,742 pence after the company posted first-quarter sales that rose faster than analysts had forecast. So-called organic lager volume increased 5 percent in the three months ended June 30, compared with the 2.6 percent median estimate of analysts surveyed by Bloomberg.
Shell lost 2.3 percent to 2,137.5 pence as Europe’s biggest oil company said second-quarter profit fell 13 percent, excluding one-off items and inventory changes, to $5.7 billion. That missed the $6.3 billion average estimate of analysts in a Bloomberg News survey.
Lamprell Plc (LAM) plummeted 31 percent to 84.75 pence after the oil and gas rig engineer said that rising costs will cause a loss of about $45 million in the first half. The company said that it will seek waivers from banks on loan covenants.
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