U.K. Stocks Rise as ECB Affirms Supportive Policy
U.K. stocks rose to a three-week high as European Central Bank said monetary policy will remain accommodative and after the Federal Reserve said it saw a modest-to-moderate recovery in the U.S. economy.
InterContinental Hotels Group Plc (IHG) climbed 2.1 percent after UBS AG recommended the shares. HSBC Holdings Plc (HSBA) led banks higher. Dixons Retail Plc (DXNS) surged to its highest price since September 2008 after agreeing to sell its Turkish operations and getting an offer for its Pixmania unit. GlaxoSmithKline Plc fell after an experimental drug failed to help skin-cancer patients.
The FTSE 100 Index (UKX) rose 57.7 points, or 0.9 percent, to 6,532.44 at the close in London, its highest level since Aug. 14. The gauge lost 3.1 percent last month as concern grew the Fed will decide to cut bond purchases at its Sept. 17-18 meeting and the U.S. and its allies will take military action against Syria. The broader FTSE All-Share Index also increased 0.9 percent today, while Ireland’s ISEQ Index rose 1.3 percent.
“With the Fed likely to begin tapering following the September Federal Open Market Committee meeting, macro is likely to remain a driver for markets,” Gerard Lane, a Liverpool, England-based strategist at Shore Capital Group Ltd. wrote in a note. “For those with a more upbeat view of the U.K. economy, as the U.K. households engage again in more borrowing to fuel spending and house prise inflation, we remain positively disposed towards the banks.”
The volume of shares traded in FTSE 100-listed companies was 22 percent higher than the 30-day average, according to data compiled by Bloomberg.
Bank of England officials maintained the stock of bond purchases at 375 billion pounds ($585 billion) and held the bank rate at 0.5 percent this month, matching economists’ forecasts in Bloomberg surveys.
The European Central Bank also kept its rate at a record low of 0.5 percent, as economists had predicted in another survey.
“Looking ahead, our monetary policy stance will remain accommodative for as long as necessary in line with the guidance provided in July,” ECB President Mario Draghi said at a press conference in Frankfurt. “The overall improvements in financial markets seen since last summer appear to be working their way through to the real economy.”
In the U.S., demand for automobiles and housing helped boost growth in the world’s biggest economy, the Fed said in its Beige Book survey.
“Reports from the twelve Federal Reserve Districts suggest that national economic activity continued to expand at a modest to moderate pace during the reporting period of early July through late August,” according to a statement late yesterday.
Jobless claims in the world’s biggest economy fell to 323,000 in the week ended Aug. 31, from a revised 332,000 a week earlier, a Labor Department report showed. That’s lower than the 330,000 median estimate of economists in a Bloomberg survey.
Separate reports showed U.S. factory orders fell less than forecast in July, while the services industry expanded in August at a faster pace than economists had predicted.
InterContinental climbed 2.1 percent to 1,875 pence. UBS raised its rating on the shares to buy from neutral, citing an attractive valuation after a recent share-price drop. The share price fell 5.5 percent in August.
Dixons jumped 5.9 percent to 46.88 pence after saying it got an irrevocable offer for Pixmania from Germany’s Mutares AG. The bid requires Dixons to pay 69 million euros ($91 million) in cash to support the business. The retailer also said it will sell its ElectroWorld operations in Turkey to Bimeks Bilgi Islem & Dis Ticaret AS for 2 million pounds.
Barclays Plc raised its 12-month price estimate on the shares to 60 pence from 52 pence, saying the terms of both sales were better than expected.
HSBC rose 2.3 percent to 707.6 pence and Lloyds Banking Group Plc (LLOY) gained 3 percent to 74.77 pence. Royal Bank of Scotland Group Plc (RBS) added 2.2 percent to 335.8 pence. A gauge of lenders in the FTSE 350 Index rose the most in two months.
EasyJet Plc (EZJ) added 1.7 percent to 1,236 pence as the discount airline said the number of passengers rose to 6.1 million in August from 5.87 million a year earlier.
GlaxoSmithKline Plc (GSK) dropped 0.8 percent to 1,652.5 pence after its MAGE-A3 experimental drug failed to benefit patients with skin cancer in a late-stage clinical trial. The study will continue seeking signs that the medication helped a specific subset of patients with melanoma, with results expected in 2015, the drugmaker said in a statement.
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