Bloomberg News

U.K. Stocks Rise for Sixth Day Led by Banks; RBS, Lloyds Climb

July 01, 2011

July 1 (Bloomberg) -- U.K. stocks climbed for a sixth day, sending the benchmark FTSE 100 Index up by the most this week in almost a year, as banks rallied on easing concern that Greece will default on its debt.

Lloyds Banking Group Plc rallied 3.7 percent as analysts recommended the mortgage lender’s shares. Royal Bank of Scotland Group Plc rose 3.2 percent after the bank was said to have agreed to sell a stake of property loans worth about 1.4 billion ($2.3 billion). London Stock Exchange Group Plc fell, paring some of yesterday’s 11 percent rally.

The FTSE 100 rose 44.05, or 0.7 percent, to 5,989.76 at the 4:30 p.m. close in London, extending the gauge’s advance this week to 5.1 percent after Greece approved a package of austerity measures, qualifying the country for more aid from the European Union. The FTSE All-Share Index gained 0.8 percent today, while Ireland’s ISEQ Index jumped 1.4 percent.

“The banking sector has been the strong U.K. performer today,” said Yusuf Heusen, a senior sales trader at IG Index in London. “Investors will be hoping that the reduced chance of a Greek default and more positive economic data means a rosier outlook for the banking community.”

Austrian Finance Ministry official Thomas Wieser said Greece may receive as much as 85 billion euros ($123 billion) in new financing, including a contribution from private investors, in a second bailout aimed at preventing a default. EU finance chiefs will hold a conference call this weekend to free up a 12 billion-euro payment overdue.

U.K. stocks extended gains after a report showed that U.S. manufacturing unexpectedly expanded at a faster pace in June, a sign the industry is rebounding in the world’s largest economy.

Lloyds, RBS Rally

Lloyds, Britain’s largest mortgage lender, climbed 3.7 percent to 50.8 pence after UniCredit SpA upgraded the bank to “hold” from “sell” and BofA Merrill Lynch Global Research recommended that investors buy the stock, saying the bank’s new targets help form “earnings power.”

Lloyds jumped 9.7 percent yesterday after announcing job cuts as part of plans to cut costs by 1.5 billion pounds by 2014.

RBS gained 3.2 percent to 39.7 pence after the bank agreed to sell a stake in a group of U.K. commercial-property loans to Blackstone Group LP according to two people briefed on the plan.

Blackstone plans to buy a 25 percent stake in the loans and take over management of the assets to try to recover as much value as possible, said one of the people with knowledge of the agreement, who asked not to be named because the deal wasn’t publicly announced.

Separately, UBS AG strategist Karen Olney today said in a report to clients that the direct impact on banks from a Greek default was “not that material.” The analyst cited Lloyds and RBS in her list of top value picks in financials.

Northumbrian Water

Elsewhere, Northumbrian Water Group Plc climbed 1.5 percent to 422 pence after the utility received a proposal for a cash offer from Li Ka-Shing’s Cheung Kong Infrastructure Holdings Ltd. The Hong Kong-based company first indicated its interest in the utility serving the north east of England on June 27.

United Utilities Group Plc gained 1.9 percent to 610.5 pence and Severn Trent Plc jumped 1.5 percent to 1,494 pence.

Speedy Hire Plc advanced 3.3 percent to 31 pence after the company signed a 220 million-pound asset-based revolving credit agreement with six banks.

Flybe Group Plc increased 4.2 percent to 191.8 pence after the regional British carrier agreed to buy Finnish Commuter Airlines Oy in a joint venture with Finnair Oyj.

LSE Shares Drop

Among declining shares, LSE lost 2.6 percent to 1,033 pence, paring some of yesterday’s 11 percent increase after the bourse scrapped its bid for TMX Group Inc. and UBS AG said the company may become a bid target.

The Daily Telegraph reported Middle East investors who hold more than 35 percent of LSE indicated that they aren’t selling, citing people familiar with the investors.

Borse Dubai Ltd. and the Qatar Investment Authority both want the LSE to remain independent and blocked the deal with Canada’s TMX, the newspaper said, citing BofA Merrill Lynch analysts.

Premier Foods Plc dropped 10 percent to 17.1 pence, extending yesterday’s 22 percent selloff after the U.K.’s biggest food manufacturer said it expects profit for ongoing business in the first half to fall below last year’s figure.

Morgan Stanley downgraded the company to “equal weight” from “overweight,” while Citigroup Inc. cut is price estimate for the shares by 28 percent to 29 pence.

Randgold Resources Plc fell 1.5 percent to 5,175 pence. Morgan Stanley initiated coverage of the gold producer with an “underweight” recommendation.

--Editors: Will Hadfield, Andrew Rummer

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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