Bloomberg News

U.K. Stocks Rise From Three-Month Low as Mining Companies Climb

June 17, 2011

June 17 (Bloomberg) -- U.K. stocks climbed, erasing earlier losses, as investors speculated that European officials may soon reach a resolution on Greece’s bailout package.

Randgold Resources Ltd. gained 2.2 percent, breaking a five-day losing streak, and Kazakhmys Plc climbed 1.7 percent, helping lead gains in mining companies as gold and copper advanced in London. Aggreko Plc and Intertek Group Plc rallied after Goldman Sachs Group Inc. recommended the shares.

The FTSE 100 rose 0.3 percent to 5,714.94 at 4:30 p.m. in London after falling as much as 0.9 percent. The gauge has declined four consecutive weeks amid concern that Greece may default on its debt. The FTSE All-Share Index advanced 0.3 percent today, while Ireland’s ISEQ Index rallied 0.8 percent.

Stocks erased losses after German Chancellor Angela Merkel retreated from demands that bondholders shoulder a “substantial” part of the cost of a Greek rescue. Speaking at a press conference with French President Nicolas Sarkozy in Berlin, Merkel said she will work with the European Central Bank to avoid disrupting markets.

“It’s likely the market took heart from Germany’s concession and continued support from France,” said London- based Ioan Smith, a director at Knight Capital Europe Ltd. “Investors haven’t got carried away as yet. The risk now is with Greece and whether they approve a new austerity package.”

The euro strengthened and Greek bonds rallied as Merkel and Sarkozy signaled a reconciliation between German calls for investors to help bail out Greece and warnings from the ECB and France that a compulsory move risked triggering the euro area’s first sovereign default.

Greek Risk

Former Federal Reserve Chairman Alan Greenspan said in an interview yesterday that a Greek default is “almost certain” and could help drive the U.S. into recession, while Luxembourg’s Jean-Claude Juncker, head of the euro-region finance ministers group, said a “hard haircut” for bondholders will risk contagion to other European countries.

Randgold Resources led mining shares higher, advancing 2.2 percent to 4,679 pence, and African Barrick Gold Ltd. rose 0.5 percent to 395.4 pence as gold advanced in New York. Kazakhmys gained 1.7 percent to 1,261 pence as copper rebounded in London.

Aggreko, the world’s largest provider of mobile power supplies, rallied 2.4 percent to 1,911 pence after Goldman Sachs reiterated its “conviction buy” recommendation and raised its 12-month price estimate for the shares by 1 percent to 2,506 pence. That’s 34 percent above yesterday’s closing price.

Intertek, ARM

The bank also reiterated its “conviction buy” on Intertek, sending the shares up 1.7 percent to 1,969 pence.

ARM Holdings Plc paced European technology shares lower after Research In Motion Ltd., the maker of the Blackberry smartphone, cut its profit forecast.

ARM, whose chip designs are used in Apple Inc.’s iPad, fell 1 percent to 556 pence, Wolfson Microlectronics Plc slid 0.9 percent to 234.5 pence and Imagination Technologies Group Plc, which was cut to “hold” from “buy” at Royal Bank of Scotland Group Plc today, dropped 5.9 percent to 437.7 pence.

RIM said quarterly revenue may drop for the first time in nine years. The company forecast sales of $4.2 billion to $4.8 billion in its fiscal second quarter.

Supergroup Plc rallied 7.5 percent to 900 pence on the broader All-Share Index as analysts at Liberum said the stock looked oversold. The Evening Standard reported yesterday that Abercrombie & Fitch Co. may be interested in the U.K. retailer.

Laird Plc advanced 4.5 percent to 197.3 pence as the company announced plans to close its handset-antenna unit. The stock soared 38 percent yesterday after Cooper Industries Plc said its offer, which valued the U.K. company at about 493 million pounds ($798 million), was spurned. Analysts at Arden Partners said today that Cooper’s bid for Laird was “not compelling.”

--Editors: David Risser, Nick Baker

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net


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