Bloomberg News

U.K. Stocks Rally, Snapping Five-Day Slump; Sainsbury Climbs

October 05, 2011

Oct. 5 (Bloomberg) -- U.K. stocks rallied, snapping a five- day slump on the benchmark FTSE 100 Index, amid speculation policy makers are examining measures to shield banks from the sovereign-debt crisis.

Rio Tinto Group climbed 7.1 percent as shares of raw material producers helped European stocks higher. J Sainsbury Plc, the U.K.’s third-biggest supermarket company, rose 3.6 percent after saying it maintained sales growth in the second quarter.

The FTSE 100 Index advanced 157.73 points, or 3.2 percent, to 5,102.17 at the 4:30 p.m. close in London. The FTSE All-Share Index gained 2.9 percent, while Ireland’s ISEQ Index rose 2.2 percent.

Markets rallied “on reports that European finance ministers were examining ways of co-ordinating large scale recapitalizations of banks on a local level in an attempt to convince markets that governments would do all they could to safeguard and support the European banking sector,” said Michael Hewson, a markets analyst at CMC Markets in London.

The FTSE 100 yesterday closed below 5,000 for the first time since July 2010, as policy makers failed to reassure investors they can contain the European debt crisis. The gauge lost 14 percent in the third quarter, its biggest drop since 2002, amid concern that Greece’s debt woes will spread to other countries in the region and that the euro area’s economy is stalling.

The Bank of England should consider easing monetary policy if the outlook for the economy deteriorates further, the International Monetary Fund said. The IMF cut its 2011 and 2012 U.K. growth forecasts last month as threats from Europe’s sovereign-debt crisis weigh on the economy.

U.S. Services

Stocks extended gains after a gauge of U.S. service industries topped estimates, tempering concern about a slowdown in the world’s largest economy.

Rio Tinto advanced 7.1 percent to 2,905.5 pence. Xstrata Plc rose 7.1 percent to 818.2 pence, both after five days of declines. A gauge of miners in the Stoxx Europe 600 Index was the second-best performer among the gauge’s 19 industry groups.

Sainsbury climbed 3.6 percent to 284.6 pence after saying sales for the second quarter excluding petrol and including value added tax, rose 1.9 percent. It thus maintained its sales growth in the second quarter and increased its share in the U.K. grocery market.

North Sea Deal

EnCore Oil Plc rallied 64 percent to 74 pence, the most since June 2010, as Premier Oil Plc, a London-based oil explorer, agreed to buy EnCore for 221 million pounds ($340 million) to add reserves and production in the North Sea.

BTG Plc surged 11 percent to 265 pence as the specialist drugmaker said 2012 sales may beat analysts’ estimates, helped by new treatments and the withdrawal of a rival’s product.

Grainger Plc gained 11 percent to 86 pence as the U.K.’s largest publicly traded residential landlord reached loan agreements that extend the maturity of its debt.

Supergroup Plc slumped 30 percent to 707 pence, its biggest fall ever, after saying profit will decline by as much as 9 million pounds this year due to problems with its warehouse system. The company said that an upgrade at its Barnwood site caused a “significant, temporary reduction both in the amount of stock and range of sizes reaching its U.K. stores.”

--Editors: Srinivasan Sivabalan, Andrew Rummer

To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net

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


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