U.K. Stocks Advance as Mining Companies Rise a Fourth Day
U.K. stocks rose as a gauge of mining companies posted its biggest four-day gain in 21 months and a measure of German investor confidence increased.
Fresnillo Plc (FRES) completed its longest rally in a year as UBS AG recommended that investors buy the stock. An index of London-listed life insurers declined the most in two weeks as Prudential Plc (PRU) fell from its highest price since at least 1988. Old Mutual Plc (OML) slipped 2.6 percent after Nomura Holdings Inc. downgraded the insurer.
The FTSE 100 Index (UKX) added 37.6 points, or 0.6 percent, to 6,611.94 at the close of trading in London. The FTSE All-Share Index advanced 0.5 percent, while Ireland’s ISEQ Index climbed 0.2 percent today.
“You have the basis of a decent rally for the mining sector,” said Henry Dixon, who oversees 72 million pounds ($111 million) as a London-based fund manager at Matterley, a unit of Charles Stanley Group Plc. “After a severe de-rating where share prices fell more than earnings, you’re in a situation where history, valuation and the growth picture is on your side. Mining and oil and gas stocks are now extremely cheap and will be drivers for the U.K. stock market.”
A gauge of oil and gas producers on the FTSE 350 Index has gained 3.1 percent so far this year, compared with a 13 percent advance for the broader index. Energy companies trade at 9.6 times projected earnings on a weekly basis, lower than their 10-year average of 10.1 times.
A measure of mining companies trades at 12.7 times forecast earnings, less than the 13.1 times for the FTSE 350. An index of London-listed commodity producers rose 1.4 percent to an 11-week high as Rio Tinto Group gained 2.2 percent to 3,263 pence and Glencore Xstrata Plc added 2 percent to 307.5 pence. The measure has rallied 11 percent in the last four trading days, reducing its year-to-date retreat to 12 percent.
Fresnillo jumped 5.6 percent to 1,165 pence, its highest price in two months. UBS initiated its coverage of the gold and silver producer with a buy rating. Analysts led by Daniel Major cited the company’s low costs and ability to generate free cash flow even as the price of precious metals slumps.
The FTSE 100 has surged 9.7 percent from its low on June 24 as the Bank of England and the European Central Bank signaled that interest rates will stay low, while the Federal Reserve said it remains flexible on the pace of bond buying. The U.K. equity benchmark is still 3.3 percent below its May 22 high, which was the highest level since December 1999.
The Royal Institution of Chartered Surveyors’ gauge of property prices rose to 36 in July, its highest reading since November 2006, from 21 in June. That exceeded the median estimate for a figure of 24 in a Bloomberg survey of economists. A positive number means more respondents saw values increase than decrease. A measure of inquiries from new buyers rose to 53 from 38, the most in four years, RICS said, citing its monthly poll of property surveyors.
In Germany, a gauge of investor confidence climbed more than estimated. The ZEW Center for European Economic Research’s index of investor and analyst expectations rose to 42 in August. That exceeded the median economist estimate of 39.9 in a Bloomberg News survey.
Resolution Ltd. (RSL) added 1.8 percent to 329.5 after posting first-half operating profit that beat analysts’ estimates as the value of new business in the U.K. jumped. Profit climbed to 191 million pounds in the first six months of this year, exceeding the 180 million-pound average of analyst estimates provided by the company.
An index of life insurers dropped 0.8 percent, wiping the most points off the FTSE 350. Prudential, the U.K.’s largest insurer, slipped 1.4 percent to 1,215 pence, while Standard Life Plc (SL/) lost 1.2 percent to 365.7 pence.
Old Mutual slipped 2.6 percent to 196.1 pence after Nomura downgraded the insurer to neutral from buy, saying investors may regard its dependence on South Africa for sales as negative.
Michael Page International Plc slid 4 percent to 450.2 pence after the recruitment consultancy predicted that its largest markets will remain difficult.
“With difficult conditions likely to continue in several markets and as this is the seasonally quieter summer period in both continental Europe and the U.K., we expect the third quarter will be another challenging quarter,” Steve Ingham, Michael Page’s chief executive officer, said in a statement.
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