U.K. Stocks Extend 4 1/2-Year High Amid Japan Stimulus

U.K. stocks climbed for a third day, extending the highest level in more than 4 1/2 years, as Japan’s government announced a package of stimulus measures.

Barclays Plc led an advance in banks. International Consolidated Airlines Group rallied 5.4 percent after UBS AG raised its recommendation on the parent of British Airways. BHP Billiton Ltd. and Rio Tinto Group dropped more than 1 percent as China’s inflation accelerated faster than estimated, limiting room for easing monetary policy.

The FTSE 100 Index rose 20.07 points, or 0.3 percent, to 6,121.58 at the close in London, the highest level since May 2008. The benchmark gauge has climbed 0.5 percent this week, extending last week’s 2.8 percent rally. The broader FTSE All-Share Index added 0.4 percent today, while Ireland’s ISEQ Index lost 0.5 percent.

“What we’re seeing now is a new experiment in monetary policy,” Julien Seetharamdoo, who helps manage $440 billion as senior economist and investment strategist at HSBC Global Asset Management Ltd., said on Bloomberg Television. “We’ve not really seen a convincing move out of deflation into inflation and this is what the Japanese are trying to do. In the short term, performance in equity markets is driven by what happens to the currency, and the yen continues to weaken.” He spoke in an interview with Guy Johnson and Francine Lacqua.

The volume of shares trading on the FTSE 100 was 27 percent higher than the average of the last 30 days, according to data compiled by Bloomberg.

Japan Stimulus

Japan’s government will spend 10.3 trillion yen ($116 billion) to drive a recovery from the country’s third recession in five years, according to a statement by the Cabinet Office.

The stimulus “shows a clear commitment to economic revitalization,” Prime Minister Shinzo Abe said at a press conference today in Tokyo.

U.K. manufacturing production unexpectedly declined in November, indicating continued weakness in the economy toward the end of 2012. Factory output fell 0.3 percent from October, when it dropped 1.3 percent, the Office for National Statistics said today in London. Economists in a Bloomberg survey had projected a 0.5 percent gain. Total industrial production rose 0.3 percent, also less than forecast.

A gauge of banks in the FTSE 350 Index rose 0.9 percent. Barclays advanced 1.7 percent to 299.65 pence and Royal Bank of Scotland Group Plc increased 1 percent to 360.4 pence. Lloyds Banking Group Plc added 1.4 percent to 54.04 pence.

IAG Rallies

IAG gained 5.4 percent to 207.6 pence, the highest price since August 2011. UBS upgraded the shares to buy from neutral, citing increased confidence about the airline’s talks with workers at its Spanish unit. Iberia’s ground staff, cabin crew and pilots last month agreed to negotiate terms of a restructuring plan, calling off planned strikes.

Aviva Plc added 3.3 percent to 380.1 pence after Citigroup Inc. raised its rating on the insurer to buy from neutral.

Moneysupermarket.com Group Plc jumped 6.1 percent to 168 pence, the biggest increase since Aug. 28. The U.K.’s largest price-comparison website forecast full-year sales of 204.5 million pounds ($330 million), beating the average analyst estimate of 203 million pounds.

A gauge of mining shares retreated 1 percent as Chinese inflation accelerated. Consumer prices rose 2.5 percent in December from a year earlier, the National Bureau of Statistics said today in Beijing. That compared with the 2.3 percent median estimate of 42 analysts surveyed by Bloomberg News and a 2 percent pace in November.

BHP Billiton, the world’s largest mining company, fell 2.7 percent to 2,075 pence, the biggest drop since Aug. 30. Rio Tinto, the second-largest, lost 1.2 percent to 3,468 pence.

Tullow Oil Plc tumbled 3.2 percent 1,186 pence after the U.K. explorer focused on Africa and Latin America said it will write off $299 million from unsuccessful explorations in Guyana, Suriname and Ghana. Combined with asset-value reductions, Tullow recorded total charges of about $670 million for 2012.

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