U.K. Stocks Advance as Investors Watch U.S. Debt Talks
U.K. stocks advanced for a third day, sending the FTSE 100 (UKX) Index to a two-week high, as U.S. lawmakers continued talks to raise the sovereign borrowing limit with three days to go before it lapses.
Travis Perkins Plc (TRK) rallied to its highest price in at least 22 years after analysts recommended the stock. Johnson Matthey Plc climbed 5.9 percent after JPMorgan Chase & Co. advised investors to buy the shares. Royal Bank of Scotland Group Plc dropped 1.4 percent after Bank of America Corp. said it has turned more cautious on U.K. banks.
The FTSE 100 rose 20.46 points, or 0.3 percent, to 6,507.65 at the close in London after earlier falling as much as 0.4 percent. The gauge advanced 0.5 percent last week as U.S. House Republicans proposed a short-term increase to the debt ceiling and optimism grew that Janet Yellen, nominated to head the Federal Reserve, won’t rush to withdraw stimulus. The broader FTSE All-Share Index added 0.4 percent today, as did Ireland’s ISEQ Index.
“The markets have been reluctant to be reactionary to what’s happening on Capitol Hill because we’ve been here before, and we know the political incentives are to drive this fight right down to the wire,” Lena Komileva, the London-based managing director and chief economist at G+ Economics Ltd., said in an interview with Guy Johnson on Bloomberg Television. “Therefore a temporary resolution is likely five minutes before it’s too late.”
U.S. Senate leaders continued negotiations to reach an agreement on how to end the fiscal impasse before the Treasury reaches its debt ceiling on Oct. 17. Majority Leader Harry Reid said yesterday that he had a productive conversation with Minority Leader Mitch McConnell, though they didn’t conclude a plan to send to the Democratic-controlled chamber for a vote.
The government of the world’s biggest economy has been partially shut down since Oct. 1 after lawmakers failed to pass a budget. International Monetary Fund Managing Director Christine Lagarde said the congressional deadlock threatens the global economy.
“If there is that degree of disruption, that lack of certainty, that lack of trust in the U.S. signature, it would mean massive disruption the world over,” Lagarde said on NBC. “And we would be at risk of tipping, yet again, into recession.”
Travis Perkins rallied 5.1 percent to 1,763 pence, its highest price since at least January 1991. RBC Capital Markets LLC raised its recommendation on the builders’ merchant to the so-called top pick rating from outperform. Bank of America upgraded the shares to buy from underperform, saying the company will benefit from an increase in housing activity.
Johnson Matthey Plc (JMAT) climbed 5.9 percent to 2,987 pence. JPMorgan boosted its rating of the producer of auto catalysts used to cut vehicle pollution to overweight from neutral. The company’s investments over the years in the industrial-catalyst segment will now start to speed up growth, the brokerage said.
Essentra Plc (ESNT) advanced 1.3 percent to 735 pence. The specialty-plastics supplier posted third-quarter revenue that jumped 24 percent from last year.
RBS dropped 1.4 percent to 371.7 pence. Britain’s biggest publicly owned lender was cut to underperform by Bank of America, which said it has turned more cautious on U.K. banks because of the potential for margin pressure in 2014.
Michael Page International Plc (MPI) tumbled 5 percent to 470 pence, for its biggest loss since April. The recruitment consultancy said third-quarter gross profit increased to 127 million pounds ($204 million) and that full-year operating profit will rise to 68 million pounds. Shore Capital described the interim management statement as disappointing compared with the growth reported by rivals Hays Plc and Robert Walters Plc.
Chemring Group Plc fell 4.1 percent to 211.1 pence, its lowest price since June 2006. JPMorgan downgrade the supplier of missile-avoidance equipment for combat jets to neutral from overweight. The company said last week production snags and currency shifts will hurt earnings this year, with political turmoil holding back 2014 results.
The volume of shares changing hands in FTSE 100-listed companies was 34 percent lower than the 30-day average, data compiled by Bloomberg showed.
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