U.K. Stocks Climb as Investors Assess Italian Polls

U.K. stocks climbed for a second day as investors assessed conflicting polls for evidence that Italy will get a government committed to economic reform, while Moody’s Investors Service downgraded Britain’s debt rating.

BP climbed 1.6 percent after a report that the U.S. Justice Department and the states of Alabama and Louisiana have considered settling claims stemming from the Gulf of Mexico oil spill in 2010. Antofagasta gained 3 percent after Bank of America Corp. recommended buying the shares. Pearson Plc tumbled the most in seven months after predicting its operating profit will stagnate in 2013.

The FTSE 100 increased 19.67 points, or 0.3 percent, to 6,355.37 at the close in London, after earlier rising as much as 0.9 percent. The equity benchmark is still headed for its ninth consecutive monthly advance, its longest stretch of gains since 1997. The gauge has rallied 7.8 percent this year after U.S. lawmakers agreed on a compromise federal budget. The broader FTSE All-Share Index also added 0.3 percent today, while Ireland’s ISEQ Index advanced 0.4 percent.

“The risk of a hung parliament where Bersani and Monti win the lower house, but not the senate is high,” Alberto Gallo, head of European macro credit research at Royal Bank of Scotland Plc, wrote in a note before the senate poll. “A hung parliament would be a strong negative for the market, as the senate can virtually block any key laws passed in the lower house. Both a hung parliament and a weak majority could generate a period of political instability.”

Italy’s Election

Berlusconi’s People of Freedom and the allied Northern League may win the largest share of the vote in an election for Italy’s senate or upper house, according to a survey by Istituto Piepoli for RAI, the country’s public broadcaster.

Italians voted in a parliamentary election yesterday and today that was called after Mario Monti decided to stand down as prime minister. Pier Luigi Bersani of the Democratic Party will probably win the lower house, according to a SkyTG24 Tecne poll. Bersani, an ex-communist, and Monti have both vowed to maintain budget rigor, while Silvio Berlusconi and Beppe Grillo have promised to reverse tax increases. The Interior Ministry will release the official results later today.

The U.K.’s credit rating was lowered one level to Aa1 from Aaa and the outlook on the nation’s debt changed to stable from negative, Moody’s said in a statement late on Feb. 22. The government will probably fail to reverse its deteriorating balance sheet before 2016, the company said.

The downgrade may reinforce policy makers’ tolerance for a weaker pound and their willingness to continue stimulus through monetary easing, Citigroup Inc. U.K. economist Michael Saunders wrote in a note.

BP, Antofagasta

BP, the owner of the Macondo well that blew up in 2010, gained 7.1 pence to 451.2 pence. The Justice Department and the states along the Gulf of Mexico may offer BP $16 billion to settle the civil claims related to the world’s largest accidental oil spill, the Wall Street Journal reported late on Feb. 22, citing people familiar with the talks.

Antofagasta, the copper company controlled by Chile’s Luksic family, rose 33 pence to 1,117 pence. Bank of America raised its rating on the stock to buy from neutral, with analysts led by Jason Fairclough saying the group has retained its focus on value and cash returns. The shares have still dropped 16 percent this year.

Senior, Pearson

Senior Plc, a British maker of parts for planes, advanced 7.1 percent to 237 pence, its highest price since at least 1991. Adjusted pretax profit climbed to 91.1 million pounds ($138 million) in 2012 from 78 million pounds a year earlier, the Rickmansworth, England-based company said. Sales increased 14 percent to 729.8 million pounds.

Elan Corp. rallied 6.9 percent to 8.52 euros in Dublin after RP Management LLC offered to buy the Irish drugmaker for about $6.5 billion. The New York-based company invests in drugmakers that generate royalty payments.

Royal Bank of Scotland Group Plc added 2.8 percent to 354.8 pence. The U.K.’s biggest government-backed lender may sell a 15 percent to 25 percent stake in Citizens Financial Group Inc. through an initial public offering, according to a person familiar with the matter. The bank may announce its plan when it reports full-year earnings on Feb. 28., the person said.

Pearson lost 3.7 percent to 1,171 pence after saying adjusted operating profit fell to 936 million pounds in 2012 from 942 million pounds a year earlier. The company also said it will have about 150 million pounds of restructuring costs in 2013. The publisher of the Financial Times newspaper added that adjusted operating profit at the FT Group dropped 36 percent last year.

“The FT is a valued and valuable part of the business,” Chief Executive Officer John Fallon said on a conference call today. “There is no process and no conversations about the sale of the FT.”

Reckitt Benckiser Group Plc dropped 3 percent to 4,381 pence, its biggest retreat since May. The Slough, England-based drugmaker said it will face competition to its Suboxone heroin-dependency treatment after the U.S. Food and Drug Administration approved two generic variants of the drug.

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