U.K. Stocks Advance to Two-Month High as Lloyds RalliesSofia Horta e Costa
U.K. stocks advanced for a fourth day, pushing the FTSE 100 Index to a two-month high, as commodity producers climbed on Chinese manufacturing growth and Lloyds Banking Group Plc led lenders higher.
Glencore Xstrata Plc and Rio Tinto Group rose at least 2.5 percent after a report showed manufacturing in China unexpectedly expanded last month. Lloyds surged to the highest price since October 2010 after saying it aims to resume dividend payments. Royal Dutch Shell Plc slid the most in two years after profit slumped 20 percent.
The FTSE 100 climbed 60.92 points, or 0.9 percent, to 6,681.98 at the close in London, the highest since May 28. The gauge soared 6.5 percent in July, the biggest monthly gain since 2011, as the Federal Reserve said it remains flexible on the pace of bond buying and as the Bank of England provided forward guidance on interest rates. The broader FTSE All-Share Index added 1 percent today, while Ireland’s ISEQ Index increased 1.6 percent to its highest level since September 2008.
“There’s clearly a case for owning stocks exposed to the Chinese economy,” said Alan Higgins, U.K. chief investment officer for Coutts & Co. in London. “China will go through a great painful process to become a consumption-driven economy, but it does have the resources to get through. That’s great for European exporters.”
The volume of shares changing hands in FTSE 100 companies today was 43 percent greater than the 30-day average, data compiled by Bloomberg show.
The FTSE 350 Mining Index advanced 3.3 percent, after completing its biggest monthly rally in 18 months, as base metals jumped on the London Metal Exchange. The official index measuring China’s manufacturing output rose to 50.3 in July from 50.1 in June. Economists surveyed by Bloomberg had predicted a drop to 49.8. Readings above 50 mean that activity increased.
Glencore and Rio Tinto increased 4.3 percent to 289.55 pence and 2.8 percent to 3,038 pence, respectively. Anglo American Plc, which owns the world’s largest platinum producer, climbed 5.3 percent to 1,483 pence.
A report from Markit Economics and the Chartered Institute of Purchasing and Supply showed that factory production in the U.K. climbed in July at a faster pace than economists had predicted. The gauge rose to 54.6, its highest level in 28 months and more than the 52.8 reading projected by economists.
In the U.S., manufacturing expanded at the fastest pace in more than two years, according to the Institute for Supply Management’s factory index.
The Bank of England held its asset-purchase target at 375 billion pounds ($570 billion), in line with all but one of 42 economist projections compiled by Bloomberg. The central bank also left its benchmark interest rate at a low of 0.5 percent, matching all survey predictions. Governor Mark Carney will present the Monetary Policy Committee’s review of how to manage policy expectations next week. He signaled last month that rates will remain low for an extended period of time.
The European Central Bank also left its benchmark interest rate unchanged at 0.5 percent today, in line with the median estimate in a Bloomberg survey of economists.
Lloyds jumped 8.1 percent to 74 pence. The bank said it will start talks with regulators about a timetable for resuming payouts. Lloyds last paid a cash dividend in 2008, before it sought a bailout from the U.K. government, according to data compiled by Bloomberg. The lender also posted profit before exceptional items that rose to 2.9 billion pounds in the first half, beating the 2.3 billion-pound average estimate of analysts surveyed by Bloomberg.
London-listed lenders rose, with state-owned Royal Bank of Scotland Group Plc adding 5 percent to 333.5 pence, its largest increase in two weeks. RBS will post half-year financial results tomorrow.
Shell slid 4.7 percent to 2,133 pence, its biggest decline since August 2011. Europe’s largest oil producer said profit excluding one-time items and inventory changes slid 20 percent to $4.6 billion in the second quarter because of disruption to its oil and gas pipelines in Nigeria. Earnings missed the average analyst estimate of $6 billion in a Bloomberg survey.
Aggreko Plc slumped 7.7 percent to 1,643 pence, the largest decline in seven months. The provider of mobile power generators said the pace of orders at its Power Projects unit, which accounted for more than 40 percent of sales last year, may not pick up in the immediate future.