U.K. Stocks Advance as ARM, BP Rally on Earnings

U.K. stocks advanced, rebounding from the biggest retreat in almost three months, as companies from ARM Holdings Plc to BP Plc reported results that exceeded analysts’ estimates.

ARM surged to a 12-year high after the designer of chips for Apple Inc.’s products posted a 19 percent increase in fourth-quarter revenue. BP added 1.4 percent as Europe’s second-biggest oil company reported adjusted profit that beat projections. BG Group Plc increased 3.4 percent, reversing an earlier selloff.

The FTSE 100 Index gained 35.92 points, or 0.6 percent, to 6,282.76 at the close of trading in London. The gauge lost 1.6 percent yesterday as banks fell with Spanish and Italian bonds amid signs of political uncertainty in Europe’s weakest economies. The index is still up 6.5 percent in 2013, the best start to a year since 1998.

“The earnings season in the U.S. is going OK and I would expect Europe to reflect that,” Tim Harris, who manages about $25 billion as chief investment officer at Lloyds TSB Private Banking Ltd. in London, said in a Bloomberg Television interview with Francine Lacqua. “The market is in a phase of reparation now. We are rebuilding balance sheets.”

Some 74 percent of companies in the Standard & Poor’s 500 Index have reported profit that beat analysts’ estimates since Jan. 8, according to data compiled by Bloomberg.

Volume Gains

The FTSE All-Share Index gained 0.6 percent today, while Ireland’s ISEQ Index fell 0.4 percent in Dublin. The volume of shares changing hands on the benchmark FTSE 100 was 8.6 percent higher than the average of the last 30 days, according to data compiled by Bloomberg.

Shares also advanced today as U.K. services unexpectedly grew at the fastest pace in fourth months in January, easing concern the economy is heading for a triple-dip recession. A gauge of activity surged to 51.5 from 48.9 in December, Markit Economics and the Chartered Institute of Purchasing and Supply said. A reading above 50 indicates expansion.

ARM advanced 4.4 percent to 931 pence, the highest level since March 2000. The chip designer reported a jump in fourth-quarter sales to 164.2 million pounds ($258 million) as demand for smartphones and tablets surged. Analysts had predicted 152.4 million pounds, according to the average of 18 estimates compiled by Bloomberg.

BP gained 6.65 pence to 468.7 pence, paring yesterday’s 2.2 percent decline, after reporting fourth-quarter profit of $4 billion, adjusted for one-time items and changes in inventory. That beat the $3.7 billion average analyst estimate in a Bloomberg survey.

BP Production

The company, which is the second-largest stock in the FTSE 100 by weighting, said underlying oil and gas production, stripping out the impact from divestments, should increase this year after being little changed in 2012.

BG Group jumped 38 pence to 1,142 pence after new Chief Executive Officer Chris Finlayson gave a presentation to analysts following the release of the company’s earnings.

The stock earlier fell as much as 3.4 percent after the U.K.’s third-largest oil and gas company reported a 29 percent drop in profit and scrapped its 1 million-barrel-a-day production target for 2015.

“The new CEO came across as very pragmatic and credible,” Jason Kenney, an analyst at Banco Santander SA in Edinburgh, wrote in a note to clients. “This will likely have gone down well with analysts and investors despite the reset of targets and conservative outlook. We are encouraged by the new sense of reality at BG Group.”

RBS Rises

Royal Bank of Scotland Group Plc led a rebound in banks, climbing 2.7 percent to 337.5 pence. Barclays Plc rose 1.3 percent to 295.25 pence even as the lender set aside an additional 1 billion pounds to cover misselling of payment-protection insurance.

A gauge of U.K. banks slumped 2.2 percent yesterday as rising bond yields in Spain and Italy reignited concern about the euro region’s sovereign-debt crisis.

Hargreaves Lansdown Plc rallied 5.8 percent to 734.5 pence before the retail broker reports first-half earnings tomorrow. The volume of stock changing hands was 132 percent of the three-month average, according to data compiled by Bloomberg.

Smith & Nephew Plc dropped 1.9 percent to 707.5 pence, for the biggest decline in the FTSE 100 today. Panmure Gordon & Co. lowered its recommendation on the shares to hold from buy before the medical-device company posts earnings on Thursday.

Centrica Plc slipped 1.1 percent to 345.1 pence as Bank of America Corp. downgraded the utility to underperform, the equivalent of a sell rating, from neutral. The analysts cited “heightened reinvestment risk” after the company announced a 500 million-pound share buyback yesterday.