U.K. Stocks Rally to Highest Since 2008 as Xstrata JumpsSarah Jones
U.K. stocks rallied to their highest level since 2008 as services industries unexpectedly accelerated last month and as companies from Xstrata Plc to Standard Chartered Plc increased their dividend payouts.
Xstrata led a rebound by mining companies after net income also beat analysts’ estimates. Standard Chartered rose to its highest price since 2010 after reporting its tenth consecutive year of record profit. Serco Group Plc surged the most in 9 1/2 years as the company raised its payout by 20 percent.
The FTSE 100 Index advanced 86.32 points, or 1.4 percent, to 6,431.95 at the close of trading in London, climbing for the fourth time in five days. The equity benchmark, which fell yesterday as earnings at HSBC Holdings Plc disappointed investors, has rallied 9.1 percent this year.
“As the global economy recovers, there are some good quality cyclical companies that can be expected to increase their dividends as the upturn gathers pace,” Andreas Utermann, global chief investment officer at Allianz Global Investors said in an interview on Bloomberg Television. “We are in financially repressed times. Equities offer a way out, in particular dividend stocks.”
The broader FTSE All-Share Index rose 1.4 percent today while Ireland’s ISEQ Index added 1.9 percent in Dublin. The volume of shares changing hands in companies on the FTSE 100 was 1.8 percent greater than the average of the past 30 days.
A gauge of activity by services companies increased to 51.8 in February from 51.5 in January, Markit Economics and the Chartered Institute of Purchasing and Supply said today in London. Economists had forecast a reading of 51. A number above 50 indicates expansion.
Stocks extended gains after the U.S. Institute for Supply Management’s index of non-manufacturing businesses, which accounts for almost 90 percent of the economy, grew more than forecast. The gauge climbed to 56 in February from 55.2 in January. The median economist estimate had called for a reading of 55, according to a Bloomberg survey.
Xstrata jumped 6.8 percent to 1,174 pence, rebounding after a two-day selloff, as the Swiss mining company increased its full-year dividend 14 percent to 45.5 cents per share. Net income of $3.65 billion for 2012 exceeded the average estimate of $3.49 billion in a Bloomberg survey.
Glencore International Plc, which is awaiting China’s approval for its takeover of Xstrata, added 5.7 percent to 391.2 pence. The company reported a 25 percent decline in 2012 net income, excluding significant items, to $3.06 billion. That compared with the average analyst estimate of $3.14 billion.
Standard Chartered increased 3.2 percent to 1,837.5 pence after Britain’s second-largest lender by market value reported pretax profit of $6.88 billion, beating the $6.84 billion average estimate of analysts surveyed by Bloomberg.
The bank also cut its bonus pool by 7 percent to $1.43 billion and increased its dividend to 56.77 cents a share.
Serco jumped 8.9 percent to 630.5 pence, making the company the 99th largest business in the FTSE 100 by market value in advance of tomorrow’s FTSE Index review. The operator f London’s Docklands Light Railway reported a 6.1 percent increase in 2012 pretax profit to 278.1 million pounds ($420 million).
John Wood Group Plc climbed 7.9 percent to 818 pence after the U.K. oil-services provider posted a 43 percent gain in 2012 profit before taxes and exceptional items to $362.7 million and raised its dividend 26 percent to 17 cents a share.
Meggitt Plc climbed 2.4 percent to 470 pence after the engineering company reported full-year pretax profit of 362 million pounds, beating analysts’ estimates.
Stephen Young, the company’s incoming chief executive officer, said it may make acquisitions if aerospace assets become cheaper following cuts to the U.S. defense budget.
Tullett Prebon Plc increased 7.8 percent to 280 pence, rising for the first time in four days. CEO Terry Smith said the interdealer broker, which today reported a net loss for 2012, has found no indications that employees were involved in rigging global benchmark interest rates.
Ophir Energy Plc soared 11 percent to 513 pence after the U.K. explorer in East and West Africa announced plans to raise about $833 million in a share sale, easing concern that funds will run out. Trading volumes were three times higher than the three-month daily average.
In Ireland, Paddy Power Plc rose 4.3 percent to 66.84 euros after the country’s largest bookmaker posted a record pretax profit last year and said it has had a strong start to 2013.
Bank of Ireland Plc increased 3.4 percent to 14.1 euro cents as 10-year bond yields eased in Europe’s peripheral countries and as Economic and Monetary Affairs Commissioner Olli Rehn said Ireland and Portugal may deserve more time to reduce their deficits. He spoke in Brussels late yesterday.