Bloomberg News

U.K. Stocks Post Biggest Two-Day Gain Since ’08; SABMiller Jumps

October 06, 2011

Oct. 6 (Bloomberg) -- U.K. stocks completed the biggest two-day gain since 2008 as the Bank of England expanded its bond-purchase plan and investors speculated European Union policy makers will contain the region’s debt crisis.

SABMiller Plc, the world’s second-biggest brewer, jumped the most in almost three years after Brazilian website IG reported Anheuser-Busch InBev NV may buy the British-South African brewer for $80 billion. Mining companies Rio Tinto Group, Eurasian Natural Resources Corp. and Kazakhmys Plc all climbed at least 7 percent. Standard Chartered Plc and Lloyds Banking Group Plc rose more than 8 percent.

The FTSE 100 Index advanced 189.9, or 3.7 percent, to 5,291.26 at the 4:30 p.m. close in London, extending yesterday’s 3.2 percent climb for the largest two-day increase since December 2008. The gauge lost 14 percent in the third quarter, its biggest drop since 2002, amid concern Greece’s debt woes will spread to other countries in the region and that the global economy is stalling.

“The move from the BOE will alleviate some of the downside risk to growth by spurring some lending,” said Graham Bishop, a European equity strategist at the Royal Bank of Scotland Group Plc.

The broader FTSE All-Share Index advanced 3.6 percent today, and Ireland’s ISEQ Index rose 2.8 percent.

Shares in London extended gains as the Bank of England pledged to buy the most bonds since the depths of the last financial crisis.

BOE Stimulus

The nine-member Monetary Policy Committee raised the ceiling for so-called quantitative easing to 275 billion pounds ($421 billion) from 200 billion pounds. That’s the biggest expansion since the first round of stimulus in March 2009. Only 11 of 32 economists in a Bloomberg News survey predicted an increase in asset purchases.

European Central Bank President Jean-Claude Trichet, fronting a policy decision for the final time, said the bank will resume covered-bond purchases and reintroduce year-long loans for banks as the sovereign debt crisis threatens to lock money markets.

The ECB will spend 40 billion euros ($53 billion) on covered bonds starting next month and will offer banks two additional unlimited loans of 12 and 13-month durations, Trichet said at a press conference in Berlin after policy makers left the benchmark interest rate at 1.5 percent.

SABMiller Report

SABMiller shares surged 7 percent to 2,247.5 pence, the biggest advance since November 2008, as IG reported that the company is in talks to be bought by AB InBev, the world’s largest brewer.

Guilherme Barros, a columnist at the Sao Paulo-based website, said a deal could be worth about $80 billion. He didn’t say how he obtained the information. Spokespeople for the two brewers declined to comment on the report.

Rio Tinto advanced 7.6 percent to 3,126.5 pence and ENRC gained 9.7 percent to 611.5 pence, the largest increase since April 2009. Kazakhmys surged 8.3 percent to 847.5 pence. A gauge of basis resources shares in the Stoxx Europe 600 Index was the best performer among 19 industry groups as copper, lead, nickel and tin rallied in London.

U.K. banks advanced as German Chancellor Angela Merkel said the euro area will only use its rescue fund as a last resort to save banks and that investors may have to take deeper losses as part of a Greek rescue.

Banks Gain

Standard Chartered rose 8.8 percent to 1,325 pence and Lloyds increased 8.7 percent to 35.87 pence. Barclays Plc climbed 8 percent to 167.85 pence.

“Markets are beginning to believe in European policy makers,” said Henrik Drusebjerg, a senior strategist at Nordea Bank AB in Copenhagen. “If the crisis is solved, there’s so much bad news priced into shares that people are now buying because they’re afraid to be left behind if the rally comes.”

EasyJet Plc advanced 4.6 percent to 347 pence after saying it will open two new bases in France next year, strengthening its challenge to the nation’s flagship carrier, Air France-KLM Group. Separately, EasyJet was upgraded to “outperform” from “neutral” at Credit Suisse Group AG.

Mouchel Group Plc slumped 34 percent to 20.5 pence, the biggest drop on record. The provider of highway maintenance services said Chief Executive Officer Richard Cuthbert resigned after an accounting error wiped out 4.3 million pounds of profit from a contract.

--Editors: Srinivasan Sivabalan, Andrew Rummer

To contact the reporter on this story: Peter Levring in Copenhagen at plevring1@bloomberg.net

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


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