U.K. Stocks Climb as Euro-Area Ministers Meet on Greece
U.K. stocks climbed, extending yesterday’s biggest rally in more than five months, as euro-area finance ministers’ met to discuss Greece’s bailout and as shareholders approved the $31 billion takeover of Xstrata Plc. (XTA)
Xstrata jumped 3.1 percent after its shareholders approved the merger with Glencore International Plc. (GLEN) InterContinental (IHG) Hotels Group Plc climbed 2.7 percent as Barclays Plc (BARC) upgraded the shares. EasyJet Plc (EZJ) rallied to a five-year high after the airline doubled its dividend.
The FTSE 100 Index climbed 10.44 points, or 0.2 percent, to 5,748.1 at the close in London, extending yesterday’s 2.4 percent rally after President Barack Obama said he was confident he will reach a budget agreement with Congress. The FTSE All- Share Index also rose 0.2 percent, while Ireland’s ISEQ Index gained 0.6 percent.
“In the next couple of days, the European Union will signal the next tranche of aid for Greece, providing conditions are met,” Michael O’Sullivan, head of portfolio strategy at Credit Suisse Private Banking in London, said in a Bloomberg Television interview from London. “That has to be voted on by various European parliaments; so we not quite out of the woods yet. It does signal this continuation of the plan where the EU tries to keep the euro zone together.”
European finance ministers are expected to discuss ways to fill a 15 billion-euro ($19.2 billion) gap in Greece’s public accounts and win over the International Monetary Fun. The meeting, which started at 5 p.m. in Brussels, follows last week’s decision by European leaders to grant Greece an extra two extra years to cut its deficit.
Morgan Stanley today forecast the euro-area economy will shrink 0.5 percent in 2013, cutting its previous projection for a stagnant gross domestic product. It also lowered its estimate for growth in the U.K. next year to 0.8 percent, compared with its earlier forecast of 1 percent.
Xstrata climbed 3.1 percent to 986.6 pence, for the biggest advance on the FTSE 100. Glencore’s takeover bid was approved by the company’s shareholders who, however, rejected retention bonuses totaling about 144 million pounds ($229 million).
Xstrata’s board on Oct. 1 recommended that shareholders vote for the takeover subject to approval of the retention pay. Qatar Holding LLC, holder of a 12 percent stake in Xstrata, abstained from the bonus vote. John Bond, chairman of the Xstrata, said he would step down after the board of the merged company finds a replacement.
Glencore climbed 1.6 percent to 331.75 pence.
InterContinental climbed 2.7 percent to 1,633 pence after Barclays upgraded the world’s largest provider of hotel rooms to overweight, the equivalent of a buy recommendation, citing the potential for asset sales.
“We consider IHG to be the most interesting restructuring story in our leisure coverage over the next one to two years,” analysts wrote in a note to clients today. “We expect to see circa $800 million assets sold with proceeds earmarked for returns to shareholders in 2013.”
EasyJet Plc jumped 6.1 percent to 692 pence, the highest since November 2007, after the discount airline increased its annual dividend to 21.5 pence a share from 10.5 pence and reported a 28 percent jump in full-year pretax profit to 317 million pounds ($504 million).
International Consolidated Airlines Group SA (IAG), the parent company of British Airways, climbed 2.6 percent to 167.6 pence after RBC Capital Markets upgraded the shares to outperform, the equivalent to buy, from underperform.
Lonmin Plc (LMI) jumped 13 percent to 310.7 pence, the biggest rally since March 2009, extending yesterday’s 9.3 percent advance after world’s third-largest platinum producer won support from shareholders for a $817 million stock sale aimed at helping it avoid breaching pledges to creditors.
Premier Foods Plc (PFD) advanced 2.7 percent to 94.75 pence after the owner of the Hovis bread and Bisto gravy brands announced plans to close two bakery sites next year and cut 900 jobs to help drive profitable growth in the unit. “These proposals are not expected to have an impact on 2012 trading profit,” the company said in a statement today.
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