Bloomberg News

U.K. Stocks Rally on Lloyds Earnings, U.S. Factory Data

May 01, 2012

U.K. stocks jumped the most in two weeks after Lloyds Banking Group Plc (LLOY) reported profit that topped analyst estimates and U.S. manufacturing expanded at the fastest pace in 10 months.

Lloyds, Britain’s biggest mortgage lender, climbed 8.3 percent as first-quarter profit more than doubled. Imperial Tobacco (IMT) Group Plc gained 3.7 percent as its earnings matched projections. Chemring Group Plc (CHG) rallied the most in 13 years after winning two orders. BP Plc (BP/) paced declining shares after net income dropped 19 percent.

The FTSE 100 Index rose 74.45 or 1.3 percent, to 5,812.23 in London, the largest gain since April 17. The gauge fell 0.5 percent last month as Britain slipped into a double-dip recession and concerns grew that the euro-area debt crisis is deepening. The FTSE All-Share Index surged 1.2 percent today, while Ireland’s ISEQ Index climbed 1.1 percent.

“The market has been assisted by a number of factors that included a decent rally by bank stocks buoyed by better than expected first quarter numbers from Lloyds,” said Angus Campbell, head of market analysis at Capital Spreads in London. We’ve also seen “strength from U.S. markets where the news flow has been conducive to buying equities.”

Stocks extended gains today after U.S. data showed manufacturing in the world’s largest economy expanded in April, driven by gains in orders and production. The Institute for Supply Management’s factory index climbed to 54.8, exceeding the most optimistic forecast in a Bloomberg survey, from 53.4 in March. Readings greater than 50 signal growth.

U.K. Manufacturing

In contrast, U.K. manufacturing grew at a slower rate than economists forecast in April as new export orders declined at the fastest pace since May 2009.

The volume of shares changing hands in companies on the FTSE 100 (UKX) today was 36 percent lower than the average of the last 30 days, according to data compiled by Bloomberg. All western European markets, except the U.K., Ireland and Denmark, were closed for the May Day holiday.

Lloyds jumped 8.3 percent to 33.60 pence after pretax profit, excluding one-time items and asset sales, more than doubled to 628 million pounds ($1 billion). The median analyst estimate was for a profit of 422 million pounds, according to a Bloomberg survey. Total impairments fell by 36 percent, helped by the lender’s Irish and Australian units.

Royal Bank of Scotland Group Plc (RBS), which is scheduled to report earnings on May 4, gained 4.2 percent to 25.3 pence. Barclays Plc (BARC) rose 3.6 percent to 226.2 pence and HSBC Holdings Plc increased 1.8 percent to 565 pence.

Imperial Tobacco

Imperial Tobacco increased 3.7 percent to 2,556 pence after Europe’s second-biggest tobacco company reported a 3 percent increase in adjusted operating profit to 1.52 billion pounds in the six months ended March 31, helped by higher prices for cigarettes in the U.K. That equaled the median estimate of four analysts surveyed by Bloomberg.

Chemring jumped 20 percent to 391.9 pence, the biggest gain since February 1999. The defense manufacturer said it has now received all five key orders for 2012, including a contract for ground-penetrating radar for the U.S. Army.

BP retreated 0.8 percent to 441.3 pence. Europe’s second- largest oil company reported a 19 percent decline in first- quarter net income to $5.9 billion, as asset sales lowered production and refining weakened.

Excluding one-time items and changes in inventories, profit missed analyst forecasts. Oil and gas production, including output from the Russian TNK-BP venture, was 3.45 million barrels of oil equivalent a day.

Man Group Slides

Man Group tumbled 5.5 percent to 97.8 pence, retreating for a second day. The world’s largest publicly traded hedge fund manager said clients redeemed $4.1 billion in the first quarter. The outflow was partly offset by $3.1 billion of sales. Assets under management increased to $59 billion from $58.4 billion.

Man Group’s biggest hedge fund, the $21 billion AHL computerized trading system, has lost 2.1 percent this year after declining 6 percent in 2011, according to data compiled by Bloomberg. The shares have retreated 23 percent this year.

Aer Lingus (AERL) Group Plc gained 1.9 percent to 99.3 euro cents in Dublin after Etihad Airways, the third-largest carrier in the Middle East, built up a 2.99 percent holding in the Irish airline. The stake could be increased should the pair reach an agreement on an alliance, Aer Lingus said in a statement.

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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