Bloomberg News

U.K. Stocks Rise on Optimism Euro Area Will Expand Rescue Fund

October 21, 2011

Oct. 21 (Bloomberg) -- U.K stocks climbed to an 11-week high as European policy makers considered unleashing $1.3 trillion to help contain the debt crisis as they sought to break a deadlock between Germany and France.

Miners and banks led the advance. Rio Tinto Group gained 4.5 percent, tracking copper and other commodities on the London Metal Exchange. Barclays Plc jumped 5.8 percent. Weir Group Plc surged 5.9 percent after Bank of America Corp. said the oilfield services company will benefit from increased shale oil production.

The benchmark FTSE 100 Index added 103.97, or 1.9 percent, to 5,488.65 at the close in London, the highest since Aug. 3. The gauge has still tumbled 9.9 percent since February amid concern that the debt crisis is worsening and the economy is faltering. The broader FTSE All-Share Index also rose 1.9 percent today, while Ireland’s ISEQ Index climbed 1.3 percent.

“Most traders appear to be waiting in the shadows, happy to see what the latest round of Franco-German political arm- wrestling will throw up come Monday,” Yusuf Heusen, a sales trader at IG Index in London, wrote in e-mailed comments. “Those who have ventured out looking for action have been broadly positive.”

Euro-area leaders may combine the region’s temporary and planned permanent rescue funds as of mid-2012 to release as much as 940 billion euros ($1.3 trillion) to fight the debt crisis. The plan is also aimed at breaking an impasse between Germany and France. The leaders will meet on Oct. 23 and again three days later.

‘Different Ballgame’

“Markets have sidestepped this week, disappointed the event wasn’t sooner, but it’s not the end of the world,” said Graham Bishop, a European equity strategist at the Royal Bank of Scotland Group Plc. “If the discussions had broken down, it would have been a whole different ballgame.”

Barclays led banks higher, surging 5.8 percent to 181.95 pence. Lloyds Banking Group Plc climbed 3.9 percent to 32.87 pence. Royal Bank of Scotland Group Plc rose 3.4 percent to 24.43 pence.

A report showed U.K. consumer confidence fell for a fourth month in September as unemployment and inflation squeezed Britons, Nationwide Building Society said. An index of sentiment slipped 3 points from the previous month to 45, the lowest since April, the Swindon, England-based lender said. A gauge of consumers’ expectations fell to 62 from 65.

BOE Forecasts

The Bank of England, which has restarted asset purchases to aid the recovery, said this week that economic growth may stall in the current quarter. The economy grew just 0.1 percent in the second quarter, while unemployment rose to the highest in 15 years in the three months through August.

Copper surged 6.1 percent on the LME, trimming its weekly decline. Rio Tinto, the world’s second-biggest mining company, advanced 4.5 percent to 3,151 pence. Antofagasta Plc, controlled by the Luksic family, Chile’s richest, gained 5.5 percent to 1,096 pence.

BG Group Plc rose 2.7 percent to 1,354.5 pence after Nomura Holdings Inc. recommended buying the shares and called the stock one of its best investment ideas among integrated oil companies.

Weir Group, the Glasgow-based engineering company, rallied 5.9 percent to 1,773 pence. Bank of America Alex Toms said he sees the company benefiting from increased shale oil production in the U.S. and that makes Weir a “very compelling” investment.

Intercontinental Hotels Group Plc jumped 5 percent to 1,115 pence after Morgan Stanley included the company on a list of “high conviction” shares.

--With assistance from Srinivasan Sivabalan in London. 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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