Bloomberg News

U.K. Stocks Climb as Lloyds, BSkyB Earnings Top Estimates

November 01, 2012

U.K. stocks climbed the most in a month as Lloyds (LLOY) Banking Group Plc and British Sky Broadcasting Group Plc (BSY) reported better-than-estimated earnings and U.S. manufacturing expanded.

Lloyds, Britain’s biggest mortgage lender, gained 8.3 percent and BSkyB, the nation’s largest pay-television provider, rallied 7.1 percent. BT Group Plc (BT/A) jumped the most in more than two years after the U.K.’s biggest fixed-line phone company kept a full-year profit target and raised its dividend. Croda International Plc (CRDA) slipped 1.3 percent as operating profit missed analyst projections.

The FTSE 100 Index (UKX) rose 79.22 points, or 1.4 percent, to 5,861.92 at the close in London, the largest increase since Oct. 1. The equity benchmark has rallied 11 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 1.3 percent today, while Ireland’s ISEQ Index added 1 percent.

“The main focus for today has been U.K. corporate earnings,” Angus Campbell, head of market analysis at Capital Spreads in London, told Caroline Hyde on Bloomberg Television. “On that front, things have been relatively good. If you look at BSkyB, numbers are overall better than expected.”

The number of shares changing hands in FTSE 100 companies today was 49 percent greater than the 30-day average, according to data compiled by Bloomberg. Volumes were lower than usual for the first two days of this week as Hurricane Sandy shut U.S. equity markets.

China Economy

China’s manufacturing expanded for the first time in three months in October. The Purchasing Managers’ Index rose to 50.2 from 49.8 in September, the National Bureau of Statistics and China Federation of Logistics and Purchasing said, matching the median forecast in a Bloomberg survey of 30 economists. A reading above 50 indicates expansion.

In the U.S., the Institute for Supply Management’s factory index increased to 51.7 last month from 51.5 in September, exceeding the median estimate of 51 by economists surveyed by Bloomberg. A Labor Department report showed 363,000 Americans filed claims for jobless benefits last week, down from a revised 372,000 the prior period.

The U.S. jobless rate probably increased to 7.9 percent in October from 7.8 percent in September, a Bloomberg survey of economists showed before the Labor Department issues the figure tomorrow. It will be the last of the monthly employment reports before Barack Obama and Mitt Romney face off in the Nov. 6 presidential election.

Growth Forecasts

Britain’s biggest business lobby raised its U.K. economic forecasts for this year and the next. The economy will stagnate in 2012 and expand 1.4 percent in 2013, the Confederation of British Industry said in a report in London. In August, it forecast a 0.3 percent contraction and a 1.3 percent expansion respectively.

Lloyds advanced 8.3 percent to 43.94 pence, the largest gain in six months, as the bank said it remains “confident” of meeting its full-year forecast. Pretax profit increased to 840 million pounds ($1.36 billion) in the third quarter, beating the 554 million-pound median estimate of analysts surveyed by Bloomberg.

Liberum Capital Ltd. wrote in a report that investors should expect “strong outperformance.” Shore Capital Group Ltd. said Lloyds is making “excellent progress” on improving its underlying business.

Royal Bank of Scotland Group Plc (RBS) added 4.1 percent to 287.2 pence and Barclays Plc (BARC) rose 5.2 percent to 239.25 pence.

BSkyB, BT

BSkyB gained 7.1 percent to 759 pence, the largest increase since June 2010. The company said earnings before interest, taxes and other items advanced 5.1 percent to 310 million pounds in the three months ended Sept. 30, beating the average estimate of 300 million pounds by analysts in a Bloomberg survey.

BT Group jumped 6.8 percent to 227 pence, the largest gain since May 2010, after the company kept its full-year forecast for earnings before interest, taxes, depreciation and amortization to increase from a year earlier. The phone company boosted its interim dividend by 15 percent to 3 pence a share.

Dixons Retail Plc (DXNS), the U.K.’s largest electronics retailer, surged 14 percent to 23.38 pence after two people familiar with the matter said that competitor Comet will appoint insolvency administrators as early as today.

Croda, Chemring

Croda declined 1.3 percent to 2,172 pence after posting third-quarter profit from continuing operations of 59.7 million pounds, missing analyst projections for 64 million pounds.

BG Group Plc (BG/) tumbled 4 percent to 1,102 pence as Bank of America Corp., Societe Generale SA and Macquarie Group Ltd. lowered their recommendations on the shares. The U.K.’s third- largest natural-gas producer plummeted 14 percent yesterday after saying delays in projects in the North Sea, Brazil and Egypt will hold back output growth next year.

Chemring Group Plc (CHG) plummeted 17 percent to 260.6 pence, the biggest decline in 15 years. The maker of munitions, which is the target of a takeover approach by Carlyle Group LLP, lowered its earnings outlook for the 12 months through October by 13 pence a share, without specifying a target figure. Five analysts with updated estimates had been expecting per-share profit of 43 pence.

“The profit warning reduces any remaining likelihood of a successful bid” by Carlyle, said Oliver Sleath, a London-based analyst at Credit Suisse.

To contact the reporter on this story: Namitha Jagadeesh in London at njagadeesh@bloomberg.net

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


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