Bloomberg News

U.K. Stocks Advance, Snapping Three-Day Drop; ARM Gains

October 24, 2012

U.K. stocks advanced for the first time in four days as reports showed that the slump in Chinese manufacturing is easing and purchases of new U.S. homes rose to a two-year high.

ARM Holdings (ARM) Plc surged to the highest in almost 12 years as Exane BNP Paribas increased its price target for the stock. Reckitt Benckiser Group Plc rose to the highest since 1988 after sales beat estimates. National Express Group Plc tumbled 13 percent after saying government cutbacks have hurt prospects for its bus division.

The FTSE 100 Index (UKX) gained 0.1 percent to 5,804.78 in London. The equity benchmark has rallied 10 percent from this year’s low on June 1 as European Central Bank President Mario Draghi pledged to do everything to protect the euro. The broader FTSE All-Share Index climbed less than 0.1 percent today, while Ireland’s ISEQ Index added 0.6 percent.

“The market is trying to consolidate a bit,” said Stephane Ekolo, chief European strategist at Market Securities in London. “The data from China served as a slight ray of light. Investors don’t want to give up hope.”

In China, the preliminary reading of a purchasing managers’ index released today by HSBC Holdings Plc and Markit Economics increased to 49.1 in October. The final level in September was 47.9. A reading below 50 indicates contraction.

Purchases of new U.S. homes rose in September to the highest level in more than two years, data showed today. Sales climbed 5.7 percent to a 389,000 annual pace, the most since April 2010, following a revised 368,000 rate in August. The median estimate of 75 economists surveyed by Bloomberg called for sales to rise to 385,000.

U.K. Manufacturing

The Confederation of British Industry’s gauge of factory orders dropped to minus 23 in October from minus 8 in September, the U.K.’s biggest business lobby said today. The median of 11 forecasts in a Bloomberg News survey had called for an increase to minus 6. A separate quarterly survey said manufacturing stagnated over the past three months, its worst performance since 2009.

An index of optimism about the business situation declined to minus 12 from minus 6, while a gauge of export confidence dropped to minus 19 from minus 3.

Bank of England Governor Mervyn King said the Monetary Policy Committee is ready to add supportive measures again as it assesses the strength of the domestic recovery amid signs that global economic weakness is spreading.

‘Positive Signs’

“At this stage, it is difficult to know whether some of the recent more positive signs will persist,” King said in a speech late yesterday in Cardiff, Wales. “Should those signs fade, the MPC does stand ready to inject more money into the economy.”

Euro-area services and manufacturing output contracted more than economists forecast in October, a report showed.

A composite index based on a survey of purchasing managers in both industries fell to 45.8, the lowest in more than three years, from 46.1 in September, London-based Markit Economics said today.

Measures of German manufacturing, services and business climate also missed forecasts, according to reports released today.

European Central Bank President Mario Draghi defended his plan to buy government bonds in the German parliament today with a warning about deflation risks.

‘Falling Prices’

The ECB’s so-called Outright Monetary Transactions “will not lead to inflation,” Draghi told lawmakers in Berlin, according to a text provided by the ECB. “In our assessment, the greater risk to price stability is currently falling prices in some euro-area countries,” he said.

ARM Holdings rose 5.6 percent to 675.5 pence, the highest price since November 2000. Exane raised its price target for the shares by 6 percent to 670 pence. ARM’s customer Apple Inc. yesterday unveiled its iPad Mini with prices starting at $329.

Reckitt Benckiser, the maker of Lysol cleaners and Nurofen painkillers, advanced 3.7 percent to 3,768 pence, the highest since at least 1988. Third-quarter (RB/) non-pharmaceutical sales rose 5 percent on a comparable basis, the company said. The median estimate of 10 analysts surveyed by Bloomberg was for a 4 percent gain.

The company also said it expects market growth this year to be at the top end of its forecast range and maintained a forecast that its sales will rise at a faster pace.

Argos Outlets

Home Retail Group Plc (HOME), the owner of Homebase do-it-yourself stores, rallied 1.5 percent to 105.7 pence. The company may close or relocate 75 of its Argos outlets and add more online items to revive earnings, which slumped 37 percent in the first half.

Pretax profit declined to 17.9 million pounds ($28.6 million) in the six months ended Sept. 1. That beat the average of 13.1 million pounds from eight analyst estimates compiled by Bloomberg.

Punch Taverns (PUB) rose 2.2 percent to 6.55 pence. The company, which owns more than 4,500 U.K. pubs, said it is in discussions with shareholders as it prepares to restructure 2.4 billion pounds ($3.8 billion) of mortgage-backed bonds.

The company reported earnings before interest, taxes, depreciation and amortization of 238 million pounds in the year ended Aug. 18, lower than last year’s 258 million pounds.

National Express plunged 13 percent to 180.4 pence, the sharpest decrease in three years. The U.K. coach and train operator said business in 2013 will be “challenging” (NEX) as government cutbacks in its home market and Spain hurt prospects for its bus division.

Ophir Energy Plc (OPHR), the U.K. explorer focusing on East and West Africa, declined 5.2 percent to 551 pence. Bank of America Corp. cut its recommendation on the stock to neutral from buy.

To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net

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


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