Bloomberg News

U.K. Stocks Advance, Led by Banks as Investors Bet on Greece

June 28, 2011

June 28 (Bloomberg) -- U.K. stocks rose for a third day, led by a rally in banks, as investors speculated that Greece will avoid a default and Standard Chartered Plc said it will post “double digit” growth.

Royal Bank of Scotland Group Plc and Barclays Plc gained more than 1.5 percent in London trading, while mining companies climbed with metal prices. Severn Trent Plc and United Utilities Group Plc also advanced as analysts recommended the water companies after Northumbrian Water Group Plc became the target of a possible takeover bid.

The benchmark FTSE 100 Index increased 44.54, or 0.8 percent, to 5,766.88 at the 4:30 p.m. close in London. The gauge has still lost 5.3 percent from this year’s peak in February amid mounting concern that Greece will default on its debt. The broader All-Share Index gained 0.7 percent today as did Ireland’s ISEQ Index.

“Traders bought into risky asset classes on optimism that Greece would secure the funding it requires,” said Joshua Raymond, chief market strategist at City Index in London. “The financial markets appear relatively calm and optimistic that Greece’s new austerity measures will pass a vote in parliament.”

U.K. stocks rose yesterday as Greek lawmakers met to debate budget cuts that the European Union has made a condition of providing further aid to the indebted country.

Germany’s biggest banks and insurers will meet the Finance Ministry in Berlin tomorrow as they seek to reach an agreement on their contribution to a Greek aid package, two people with knowledge of the matter said.

Banks Hold Talks

Separately, HSBC Holdings Plc Chief Executive Officer Stuart Gulliver today said the bank and other lenders have discussed Greece’s debt payments with the Institute of International Finance.

Greek Prime Minister George Papandreou faces his second survival test in a week tomorrow when lawmakers vote on the package of budget cuts. The first session of the three-day debate began in Athens yesterday.

RBS rallied 4.2 percent to 36.6 pence, the first advance in five days. Barclays climbed 1.9 percent to 242 pence and Lloyds Banking Group Plc increased 1.8 percent to 44.2 pence.

Banks also advanced after Standard Chartered, the U.K.’s third-largest bank by market value, said it may post “double- digit” growth in first-half revenue and pretax profit as it tightened control on expenses. Net interest margin, a measure of profitability on lending, was “broadly flat” compared with 2010, the bank said. The stock rose 2.7 percent to 1,581 pence.

Kazakhmys, Vedanta, Antofagasta

Kazakhmys Plc increased 2.9 percent to 1,300 pence as copper rose for the second time in three days in London. Vedanta Resources Plc advanced 3.5 percent to 1,972 pence and Antofagasta Plc rose 1.6 percent to 1,303 pence.

Severn Trent gained 2.3 percent to 1,448 pence, while United Utilities advanced 0.9 percent to 592.5 pence. Cheung Kong Infrastructure Holdings Ltd., controlled by Hong Kong billionaire Li Ka-shing, said yesterday it’s considering a cash offer for Northumbrian Water, sending the utility’s shares up 8 percent. The stock gained 0.8 percent to 416.7 pence today.

Evolution Securities raised its recommendation for all three companies to “add,” while analysts at BofA Merrill Lynch Global Research said Severn Trent and United Utilities have the most potential for gains following Cheung Kong’s announcement.

Prudential, Legal & General

Prudential rallied 2.6 percent to 705.5 pence after Goldman Sachs raised its recommendation for the insurer to “buy” from “neutral.” The brokerage also upgraded Legal & General Group Plc, the U.K.’s fourth-biggest insurer by market value, to “neutral” from “sell.” The stock increased 1.3 percent to 111 pence.

Smiths Group Plc, the world’s biggest maker of airport- security scanners, surged 3.8 percent to 1,149 pence. Chief Executive Officer Philip Bowman said the company is aiming to accelerate investment to drive “top-line growth over the medium” term, while improving margins. Bowman and executives were updating investors on its strategy in New York today.

Cable & Wireless Worldwide Plc plunged 14 percent to 45 pence after the telecommunications company said full-year profit will miss estimates because of slower-than-expected sales orders and Chief Executive Officer Jim Marsh resigned.

PV Crystalox Solar Plc sank 43 percent to 22.3 pence after the U.K.’s biggest maker of silicon wafers said it will report its first operating loss in the second half should market conditions not improve.

--Editors: Andrew Rummer, Will Hadfield

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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