U.K. Stocks Rally to 11-Week High Amid Fed Optimism

U.K. stocks advanced to an 11-week high, with the benchmark FTSE 100 Index extending its longest rally in five months, amid optimism the Federal Reserve won’t cut bond buying this year and China will deepen growth policies.

G4S Plc gained 3.5 percent as private-equity investor Charterhouse Capital Partners LLP was said to be considering a 1 billion-pound ($1.6 billion) offer for its cash-solutions business. Vedanta Resources Plc and Centamin Plc led mining companies higher. Royal Bank of Scotland Group Plc dropped the most in four months after a report that the U.K. government will decide next month on spinning off its toxic assets.

The FTSE 100 Index added 31.62 points, or 0.5 percent, to 6,654.2 at the close in London, for its highest level since Aug. 1. The gauge advanced 2.1 percent last week as President Barack Obama signed into law a measure extending the U.S. government’s borrowing authority until early 2014. The broader FTSE All-Share Index climbed 0.5 percent, while Ireland’s ISEQ Index rose 0.2 percent.

“The market believes the Fed won’t taper in 2013,” Louis de Fels, a Paris-based fund manager at Raymond James Financial Inc., which oversees about $53 billion, said. “U.S. employment figures will be released tomorrow. If it’s bad, it’ll mean tapering will pushed to 2014. If it’s good, it’ll be a positive sign of the economy.”

The volume of shares changing hands in companies listed on the FTSE 100 was 26 percent lower than the average of the past 30 days, according to data compiled by Bloomberg.

Fed Policy

Investors turned their attention to the Federal Open Market Committee’s two-day meeting beginning Oct. 29, the first since U.S. government ended a 16-day partial shutdown caused by a fiscal impasse.

The Fed will delay a reduction in its $85 billion of monthly bond purchases until after Chairman Ben Bernanke’s second term ends on Jan. 31, economists said. Policy makers will pare the pace of asset buying to $70 billion at their March 18-19 meeting, according to the median of 40 responses in a Bloomberg News survey.

The shutdown slowed fourth-quarter growth of the world’s largest economy by 0.3 percentage point, economists said. The release of data was also delayed, affecting the Fed’s ability to decide on tapering stimulus, they said.

Data tomorrow will probably show American employers added 180,000 workers in September, the most since April, after a 169,000 gain in August, according to the median estimate of 93 economists surveyed by Bloomberg.

China Policy

China’s government said the country’s economy needed unrelenting implementation of growth policies as the foundations of an economy recovery have not yet stabilized. The government will boost financial support to small businesses, stabilize foreign trade growth, cut overcapacity and look for new engines to drive consumption, according to a statement from the State Council after an Oct. 18 meeting led by Premier Li Keqiang.

G4S rose 3.5 percent to 250.5 pence, its biggest increase since Aug. 12. London-based Charterhouse approached banks and its investors over financing a deal to buy G4S’ cash-solutions business, according to three people familiar with the matter, who asked not to be identified because the talks are private. G4S, the world’s largest security-services provider, is aware of the proposal and discussed the sale option internally, said one of the people.

A gauge of U.K. mining companies added 0.6 percent, after rallying for the past two weeks. Vedanta climbed 3.1 percent to 1,071 pence, while Centamin advanced 4 percent to 53.25 pence.

Luxury Goods

Burberry Group Plc rose 1.5 percent to 1,550 pence after Goldman Sachs Group Inc. predicted the market for global luxury goods may double in sales by 2020.

Rolls-Royce Holdings Plc climbed 2.8 percent to 1,123 pence. Citigroup Inc. said the world’s second-biggest aircraft-engine manufacturer remains one of its key picks in civil aerospace because of earnings growth and valuation.

RBS fell 5.3 percent to 353.1 pence. Chancellor of the Exchequer George Osborne said the U.K. government will decide by early to mid-November whether it should break up RBS and spin off its toxic assets into a “bad bank,” the Daily Telegraph reported.

Barclays Plc, Britain’s second-largest bank by assets, lost 1.1 percent to 274.75 pence.

Marks & Spencer Group Plc retreated 1.6 percent to 487.1 pence. Gillian Ridley Whittle, development and buying director at Britain’s largest clothing retailer, will leave the company, according to spokeswoman Clare Wilkes. The Sunday Times reported earlier Ridley Whittle will join the department-store chain Target in Australia.

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