Bloomberg News

U.K. Stocks Advance as U.S. Fiscal-Cliff Concern Eases

November 19, 2012

U.K. stocks advanced the most in more than five months on optimism the U.S. will avoid a fiscal deadlock after President Barack Obama said he is confident of winning Congress support for a deal.

BP Plc advanced the most this month after a report that Europe’s second-largest oil company plans a share buyback. HSBC Holdings Plc (HSBA) gained 3.8 percent after saying it held talks to sell its stake in Ping An Insurance (Group) Co.

The FTSE 100 Index climbed 132.07 points, or 2.4 percent, to 5,737.66 at the close in London, the biggest gain since June 6. The gauge has rallied 9.1 percent from this year’s low on June 1 as the European Central Bank announced an unlimited bond- buying plan and the Federal Reserve started a third round of quantitative easing. The broader FTSE All-Share Index rose 2.2 percent today, while Ireland’s ISEQ Index added 1.2 percent.

“A bounce in risk assets, following days of declines, is the first glimmer of life we’ve seen in equities for quite a few sessions,” said Simon Denham, managing director of Capital Spreads in London. “The promise from U.S. politicians that they will work through the Thanksgiving holidays to cut a deal seems to be giving bulls a reason to dip their toes back in.”

Obama said at a press conference in Bangkok yesterday that he is “confident” of striking a deal with Congress to avoid the fiscal cliff, or $607 billion of automatic spending cuts and tax increases scheduled to occur at the start of 2013. He is on a three-nation tour in Asia.

Budget Talks

Before the trip, Obama began a new round of deficit-cut talks with senior Republicans and Democrats. His Treasury Secretary, Timothy F. Geithner, said Nov. 16 that the two parties must strike a deal soon as the lack of agreement is a “huge cloud of uncertainty hanging over the economy.”

Republicans are also signaling willingness to compromise. House Speaker John Boehner said after the U.K. markets closed on Nov. 16 that he held constructive budget talks with Obama and would accept increased government revenue and spending cuts.

Sales of previously owned houses in the U.S. rose 2.1 percent to a 4.79 million at an annual rate in October, from a revised 4.69 million a month earlier, the National Association of Realtors said in a report today. That exceeded the average of 4.74 million annual pace estimated by economists in a Bloomberg survey.

BP (BP/) gained 3.6 percent to 431.6 pence, the biggest increase since Oct. 30. The company will spend as much as 3.7 billion pounds ($5.9 billion) on a share buyback early next year, the Sunday Times reported, without citing anyone.

HSBC, Barclays

HSBC rallied 3.8 percent to 618.3 pence after Europe’s biggest lender by market value said in a statement that it’s in talks to sell its $9 billion stake in Ping An Insurance, China’s second-largest insurer.

A gauge of banking shares rose the most since Aug. 3. Barclays Plc (BARC) climbed 6.6 percent to 249.75 pence after Goldman Sachs Group Inc. raised its recommendation on the shares to buy from neutral.

Ocado Group Plc (OCDO) jumped 24 percent to 75 pence, the biggest rally since Jan. 12, after saying it will raise 35.8 million pounds by selling 55.9 million new shares at 64 pence each to existing investors. The U.K. online grocer said in a statement its lenders have agreed to extend the maturity of a capital expenditure facility by 18 months to July 6, 2015.

Lamprell Plc (LAM) rallied 17 percent to 81.25 pence after Liberum Capital wrote in a note that the company’s share price does not reflect the underlying value of its business. The oil- rig engineer has “competitive advantages” in many of its markets, Liberum wrote. The shares have plunged 70 percent so far this year.

Lamprell declined as much as 10 percent earlier today after it increased its estimate for 2012 loss to $105 million.

Associated British Foods Plc (ABF) advanced 2.9 percent to 1,434 pence after Societe Generale SA wrote in a note profits at the company’s Primark unit may grow to 1.3 billion pounds in 2022 from 356 million pounds in the year ended Sept. 15. SocGen upgraded the shares to buy from hold.

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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