Bloomberg News

U.K. Stocks Surge After Euro-Area Summit; Barclays, Xstrata Jump

October 27, 2011

Oct. 27 (Bloomberg) -- U.K. stocks surged, extending the FTSE 100 Index’s biggest monthly advance in more than 20 years, after the euro area’s leaders agreed to expand their bailout fund to $1.4 trillion in a bid to contain the debt crisis.

Barclays Plc and Royal Bank of Scotland Group Plc led a rally by lenders, surging at least 10 percent, while Aviva Plc led insurers higher, rising 8.8 percent. Xstrata Plc and Kazakhmys Plc climbed with metal prices. Burberry Group Plc jumped 6.7 percent after French rival PPR SA reported revenue that exceeded analysts’ estimates.

The FTSE 100 soared 160.58, or 2.9 percent, to 5,713.82 at the close in London, just below its 200-day moving average. The gauge has climbed 11 percent so far in October, heading for its biggest monthly advance since May 1990. The FTSE All-Share Index also increased 2.9 percent today, while Ireland’s ISEQ Index jumped 3.8 percent.

“The accord has provided something of a shot in the arm for the markets; it is a clear statement of intent,” said Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers in London. “There is going to be a lead time in terms of how this will actually play out and we need a few more details, but it’s a significant step in the right direction.”

Bondholders Take Losses

Euro-area leaders, gathered at their second summit in four days yesterday, persuaded bondholders to take 50 percent losses on Greek debt and boosted the firepower of the region’s rescue fund to 1 trillion euros ($1.4 trillion), responding to global pressure to contain the financial crisis.

Last-ditch talks with bank representatives led to the debt- relief accord, in an effort to quarantine Greece and prevent speculation against Italy and France from ravaging the euro area. The measures include recapitalization of European banks, a potentially bigger role for the International Monetary Fund and a commitment from Italy to do more to reduce its debt.

Stocks extended gains after a U.S. report showed the world’s largest economy grew in the third quarter at the fastest pace in a year. Gross domestic product rose at a 2.5 percent annual rate, matching the median economist forecast in a Bloomberg survey.

Barclays led a gauge of U.K. banks to an 8 percent rally. Britain’s second-biggest lender by assets surged 18 percent to 210 pence, its largest gain since March 2009. RBS soared 10 percent to 27.27 pence and Lloyds Banking Group Plc advanced 8.2 percent to 37.07 pence.

Extra Capital

Figures from the European Banking Authority showed U.K. banks will not be required to raise extra capital. That compares with German banks, which will have to find 5.2 billion euros, and Spanish lenders that need to raise 26.2 billion euros.

Insurers also surged. Aviva, the U.K.’s second-biggest insurer, jumped 8.8 percent to 375.5 pence. Prudential Plc rose 6.5 percent to 681 pence and Legal & General Group Plc rallied 6.8 percent to 114.9 pence.

Xstrata jumped 11 percent to 1,111 pence and Antofagasta Plc advanced 7.2 percent to 1,261 pence as copper and nickel jumped more than 3 percent in London. Kazakhmys increased 9.4 percent to 1,016 pence as Kazakhstan’s biggest copper producer forecast it will meet all of its production targets for the year, saying there is “consistent demand” for the metal.

Burberry, the U.K.’s largest luxury goods maker, gained 6.7 percent to 1,390 pence after PPR said it sees no sign of a slowdown in demand for luxuries. The owner of the Gucci brand also reported sales that beat analysts’ estimates.

Royal Dutch Shell Group Plc climbed 1.2 percent to 2,280 pence after Europe’s largest oil company said third-quarter profit doubled to $7 billion as energy prices rose and it ramped up projects. Excluding one-off items and inventory changes, earnings beat analysts’ estimates.

BP, which yesterday won its first U.S. permit to drill a new well in the Gulf of Mexico since last year’s oil spill, gained 1.5 percent to 467.85 pence.

--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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