U.K. Stocks Rally Amid Optimism Over U.S. Debt-Limit DealNamitha Jagadeesh
U.K. stocks climbed for a fourth day, their longest winning streak since August, as U.S. Senate leaders signaled progress in talks to increase the country’s debt ceiling and end a partial government shutdown.
Rio Tinto Group advanced 4.3 percent as the world’s second-biggest mining company reported record iron-ore output and raised its forecast for copper production. Royal Mail Plc gained 3 percent as retail investors traded the shares for the first time. Burberry Group Plc slid the most in more than a year after saying its chief executive officer will leave the company.
The FTSE 100 Index rose 41.46 points, or 0.6 percent, to 6,549.11 at the close in London. The gauge has advanced 3.3 percent since the close on Oct. 9 as Republicans from the U.S. House of Representatives proposed a short-term increase to the debt limit. The broader FTSE All-Share Index also climbed 0.6 percent today, while Ireland’s ISEQ Index gained 1.1 percent.
“There is clearly more optimism among investors because of the apparent progress in debt talks,” said Pierre Mouton, who helps oversee $6 billion as a portfolio manager at Notz, Stucki & Cie. in Geneva. “When it comes to equities, global growth is important and it is on the rise. So if there’s no U.S. default, there is still room for markets to perform.”
The volume of shares changing hands in FTSE 100-listed companies was 12 percent lower than the average of the past 30 days, data compiled by Bloomberg showed.
U.S. Senators have discussed an agreement that would extend the borrowing authority until Feb. 7, 2014, according to a person familiar with the talks who spoke on condition of anonymity. The plan would also re-open the federal government, which has been partially closed since Oct. 1, by funding it through Jan. 15, 2014.
“We’ve made tremendous progress,” Senate Majority Leader Harry Reid said yesterday on the Senate floor with his Republican counterpart Mitch McConnell. The Treasury has said it will exhaust measures to avoid breaching the debt limit by Oct. 17. If that happens, the government will run out of cash to pay all of its bills some time between Oct. 22 and Oct. 31, according to the Congressional Budget Office.
Rio Tinto advanced 4.3 percent to 3,215 pence after reporting third-quarter iron-ore production of 53.4 million metric tons as production expanded in Western Australia. That compares with the 53.3 million-ton median estimate of analysts surveyed by Bloomberg. The company also increased its forecast for mined copper output in 2013 by 4.4 percent from a previous estimate in July to 590,000 tons.
Royal Mail rose 3 percent to 489 pence on its first day of unconditional trading. The former state monopoly’s shares have rallied 48 percent from the 330 pence at which the U.K. government offered the securities. Conditional trading began on Oct. 11. The initial public offering was seven times oversubscribed by retail investors and 20 times by institutions.
Hargreaves Lansdown Plc added 3.1 percent to 1,040 pence after the U.K.’s biggest retail broker said assets under administration jumped 8 percent to a record 39.3 billion pounds ($63 billion) in the three months through Sept. 30.
Man Group Plc jumped 6.4 percent to 83.7 pence after UBS AG added the world’s biggest publicly traded hedge-fund manager to the list of its most-preferred financial shares.
“Although headwinds continue to surround Man Group due to AHL underperformance, we believe that markets have largely priced in this pessimism into the share price,” UBS analyst Arnaud Giblat wrote in a note. Man Group said in August that its assets under management fell 8.8 percent in the first half because of losses at its AHL hedge fund. The stock declined 17 percent from an Aug. 5 high through yesterday’s close.
Burberry slid 7.6 percent to 1,464 pence after saying CEO Angela Ahrendts will join Apple Inc. in the middle of next year. Chief Creative Officer Christopher Bailey will replace her even as he continues in his current role, the U.K.’s biggest luxury-goods maker said in a statement. Burberry also said sales rose 20 percent in the six months through September.
Capita Plc slipped 3.6 percent to 970.5 pence. Invesco Ltd., which owns a 22 percent stake in the provider of IT outsourcing services to the public sector, said that its U.K. equities portfolio manager Neil Woodford will leave in April after more than 25 years at the company. Woodford managed 33 billion pounds in assets including the Invesco Perpetual High Income and Invesco Perpetual Income funds.