U.K. Stocks Advance as Mining Companies Rebound on China

U.K. stocks rose, following the first back-to-back monthly gains for the FTSE 100 Index since October, as reports showed Chinese manufacturing expanded in May and U.K. output rose for a 15th straight month.

Anglo American Plc and Rio Tinto Group gained more than 2 percent, leading a gauge of London-listed commodity producers higher after its worst week in four months. Barratt Developments Plc added 1.2 percent after Goldman Sachs Group Inc. recommended buying the shares. Tesco Plc, the retailer that reports first-quarter sales on June 4, declined 1 percent.

The FTSE 100 climbed 19.59 points, or 0.3 percent, to 6,864.1 at the close of trading in London, following a 1 percent gain in May. The equity benchmark gauge has risen 6.4 percent from this year’s low on Feb. 4 and is 0.2 percent away from a 14-year high it reached on May 14. The broader FTSE All-Share Index advanced 0.3 percent today. Ireland’s ISEQ Index was closed for a holiday.

“We clearly shouldn’t be thinking about a Chinese recession,” Andrew Cole, investment director of the multi-asset group at Baring Asset Management, said by phone from London. “Chinese authorities are happy to live with slower growth and investors are becoming more comfortable with that.”

In China, the government’s measure of manufacturing activity rose to 50.8 in May from 50.4 in April, according to a report yesterday. The Purchasing Managers’ Index from the National Bureau of Statistics and the Federation of Logistics and Purchasing beat the 50.7 median estimate of economists surveyed by Bloomberg News. Numbers greater than 50 signal expansion.

U.K. Manufacturing

U.K. manufacturing kept its momentum in May as improving global demand boosted orders at factories. Markit Economics said its industry index stood at 57 last month after a reading of 57.3 in April. While a gauge of new orders slipped to 59.4 from 59.9, it held above the 50 level that signifies growth.

The number of shares trading hands today in FTSE 100-listed stocks was 34 percent lower than the average of the past 30 days at this time of day, data compiled by Bloomberg showed. The equity benchmark trades at 14.1 times the average estimated earnings of its members, the most expensive since the end of 2009 based on projected earnings. That’s up from a multiple of 12.9 times at the beginning of this year.

“The bears are struggling because markets keep making new highs, and point to low volumes as a signal to justify their bearish view,” Cole said. “There may be less fast money around, but investors are still hungry for yield.”

Miners Advance

Anglo American gained 2.3 percent to 1,491.5 pence and Rio Tinto rose 2.1 percent to 3,120 pence. Glencore Plc added 1.4 percent to 327.9 pence. A gauge of London-listed mining stocks on the broader FTSE 350 Index climbed 1.6 percent after dropping 4.4 percent last week.

Barratt advanced 1.2 percent to 361.6 pence as Goldman Sachs upgraded its rating on the housebuilder to buy from neutral, citing the stock’s recent weakness. Barratt capped a third consecutive month of declines in May, its longest monthly losing streak in two years. Barratt traded at 12.2 times its projected earnings last week, below a two-year average multiple of 15.1 times, data compiled by Bloomberg show.

Tesco dropped 1 percent to 300.6 pence. The company may report its worst U.K. sales in more than 10 years this week as discounters gain market share, Morgan Stanley predicted. J Sainsbury Plc, which posts quarterly sales on June 11, fell 2 percent to 339.1 pence.

Standard Life Plc slipped 1.7 percent to 393.3 pence. The insurer will be among those most affected by the introduction of collective pension arrangements in the U.K., Bank of America Corp. analysts wrote in a note today after the Sunday Telegraph reported such plans may be introduced this week at the State Opening of Parliament.

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