U.K. Stocks Advance on German Data, U.S. Budget Optimism
U.K. stocks advanced to a nine-month high as German business confidence increased more than estimated and optimism grew that U.S. lawmakers are making progress in budget talks.
Lloyds Banking Group Plc (LLOY) and Royal Bank of Scotland Group Plc (RBS) led lenders higher. London Stock Exchange Group Plc (LSE) advanced the most in more than four years as it was said to have lowered its bid for LCH.Clearnet Group Ltd. CRH Plc (CRH) climbed 4.9 percent after Deutsche Bank AG recommended the shares. CLS Holdings Plc (CLI) jumped to the highest price in more than five years.
The FTSE 100 Index (UKX) gained 25.69 points, or 0.4 percent, to 5,961.59 in London, the highest since March 16. The gauge rose yesterday as U.S. President Barack Obama softened his stance in budget discussions with Republican House Speaker John Boehner. The broader FTSE All-Share Index added 0.5 percent today, while Ireland’s ISEQ Index advanced 1.5 percent.
“Investors are more optimistic about a U.S. budget deal,” said Manish Singh, who helps manage $2 billion as head of investment at Crossbridge Capital in London. “The only question is whether President Obama and Speaker Boehner manage to sell the compromise deal to their respective constituents in the Congress, and it’s likely that they will. We will probably end the year on a good note.”
The FTSE 100 has rallied 7 percent this year as the European Central Bank announced an unlimited bond-buying plan and the U.S. Federal Reserve expanded asset purchases.
The U.S. House of Representatives may vote tomorrow on Boehner’s “plan B,” which would raise tax rates on incomes over $1 million, rather than the $400,000 threshold that Obama proposed in his latest offer. Democrats rejected Boehner’s plan, released yesterday, as inadequate.
Politicians in the world’s largest economy have until the end of the year to reach an agreement on measures to avoid more than $600 billion of automatic tax increases and spending cuts that will otherwise come into effect in January.
German business confidence rose for a second month in December, topping economists’ estimates. The Ifo institute’s business climate index, based on a survey of 7,000 executives, climbed to 102.4 from 101.4 in November. Economists in a Bloomberg survey had projected an increase to 102.
In the U.S., housing starts fell 3 percent to a 861,000 annual rate from a revised 888,000 annual pace in October, the Commerce Department reported today in Washington. The median estimate of 85 economists surveyed by Bloomberg called for a drop to 872,000. Building permits, a proxy for future construction, advanced to a four-year high.
Standard & Poor’s raised Greece’s credit rating to B- with a stable outlook, from selective default. The new grade is the highest that the ratings company has given to Greece since June 2011, when it lowered the country to CCC from B.
Lloyds gained 4.4 percent to 49.2 pence and RBS advanced 3.4 percent to 315.4 pence. HSBC Holdings Plc (HSBA), Europe’s biggest bank, climbed 2 percent to 653 pence. A gauge of banking shares in the FTSE 350 Index jumped 2.5 percent to the highest level since May 2011.
LSE advanced 2.9 percent to 1,106 pence, the highest since May 2008, after three people familiar with the matter said Europe’s oldest independent bourse lowered its bid for a majority stake in LCH.Clearnet by 30 percent. LSE said in a statement it remains in talks with LCH on potential changes to the deal.
CRH added 4.9 percent to 1,224 pence, the biggest jump since June, after Deutsche Bank raised its recommendation on the world’s second-largest maker of construction materials to buy from neutral, citing a more positive view on the European building industry for 2013.
CLS Holdings jumped 4.9 percent to 769.5 pence, the highest price since January 2007, after saying it obtained planning approval for a site in London’s Vauxhall Square. The company said it will build 520 houses, including 110 affordable houses, two hotels, a hostel, a multiscreen cinema, shops and offices. The project will cost more than 500 million pounds ($815 million), CLS said.
Vesuvius Plc and Alent Plc (ALNT) closed at 324 pence and 309.7 pence, respectively, after Cookson Group Plc split to form the two companies.
Bunzl Plc (BNZL) slid 4.3 percent to 1,020 pence, a one-month low, after JPMorgan Chase & Co. cut the company’s 2013 earnings estimates by 4 percent, citing a higher interest charge. It also reduced its target price on the shares to 1,200 pence from 1,250 pence.
Separately, Seymour Pierce Ltd. downgraded the shares to reduce, the equivalent of sell, from hold. Panmure Gordon & Co. Plc and Numis Securities Ltd. also lowered their earnings estimates for Bunzl, after the company said in a trading statement it expects underlying revenue growth of 2.5 percent this year.
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