Bloomberg News

U.K. Stocks Advance for Second Day; Tesco, Barclays Climb

February 11, 2013

U.K. stocks advanced for a second day as Tesco Plc climbed after Exane BNP Paribas SA raised its recommendation on the shares.

Tesco, the U.K.’s biggest retailer, rose to a one-month high. Barclays Plc gained after the Financial Times said the lender may cut costs by 2 billion pounds ($3.1 billion). Kofax Plc tumbled the most in 17 months after predicting that its earnings will decline in fiscal 2013.

The FTSE 100 added 13.13 points, or 0.2 percent, to 6,277.06 at the close in London. The equity benchmark dropped 1.3 percent last week amid political uncertainty in Italy and Spain. The gauge has still gained 6.4 percent this year. The broader FTSE All-Share Index also added 0.2 percent today, while Ireland’s ISEQ Index dropped 0.8 percent.

“Despite the very strong run U.K. stocks have had this year, we view them as a favored regional market,” said Toby Nangle, head of multi-asset allocation at Threadneedle Asset Management, which manages about $120 billion in assets. “Though the economy is in the doldrums, the proportion of earnings and revenue that come from outside the U.K. is high. U.K. equities still look attractive as they are cheaper than the fundamentals justify,” he said in a telephone interview.

Stocks on the FTSE 100 are trading at 16.5 times their earnings, compared with 19 times earnings for those on the Euro Stoxx 50 Index, according to data compiled by Bloomberg.

Euro-area finance ministers met in Brussels today as a parliamentary election in Italy and a corruption scandal in Spain intensify concern about the currency zone’s debt crisis. Finance chiefs and central bankers from the Group of 20 nations meet in Moscow on Feb. 15-16.

Frieden Comments

The single currency’s strength has yet to harm the bloc’s economy, Luxembourg’s Finance Minister Luc Frieden told reporters as he entered the meeting.

“The euro doesn’t need any additional, substantial measures,” he said. “We just have to make sure that countries will continue on the path of intelligent budget consolidation and structural reforms. That’s the best instrument to make the euro stable and the last year has proven this.”

Tesco climbed 1.5 percent to 367.9 pence after Exane raised its recommendation on the U.K.’s largest retailer to neutral from underperform, meaning that investors should stop selling the shares. The brokerage said Tesco has improved its free cash flow and its offering in the U.K.

Barclays advanced 1 percent to 301.5 pence after the Financial Times reported that the lender will reduce its annual cost base to 18 billion pounds from 20 billion pounds. The bank will announce the cuts as part of a strategic plan that it will present tomorrow. The newspaper cited unidentified executives at the company and analysts familiar with the matter. A gauge of banking shares in the FTSE 350 Index added 0.4 percent.

Fidessa, Kofax

Fidessa Group Plc jumped 3.3 percent to 1,577 pence after the British financial-software provider, which reported 2012 sales of 278.6 million pounds, predicted that its financial performance in 2013 will be similar to that of 2012.

“In recent months, there has been a marked and positive change of sentiment in the market,” Chief Executive Officer Chris Aspinwall said.

Kofax plunged 15 percent to 273.3 pence, its biggest tumble since September 2011, after forecasting zero to low-single-digit revenue growth in the fiscal year 2013. Adjusted earnings before interest, taxes, depreciation and amortization for the period will drop 10 percent from a year earlier, the maker of document- management software said.

The volume of shares changing hands on FTSE 100-listed companies was 27 percent lower than the average of the last 30 days, according to data compiled by Bloomberg.

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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