U.K. stocks advance to 11-week high as mining companies rally

May 12, 2014 07:58 AM

U.K. stocks climbed to their highest level in 11 weeks, as mining companies rallied, outweighing a decline by British Sky Broadcasting Group Plc.

Rio Tinto Group and BHP Billiton Ltd. gained more than 2.5 percent after JPMorgan Chase & Co. recommended buying shares in commodity producers as demand from Chinese industry recovers. Petrofac Ltd. advanced 3.5 percent, following last week’s slide. BSkyB lost 2.4 percent after saying it has held talks to buy the German and Italian pay-TV assets of 21st Century Fox Inc.

The FTSE 100 Index gained 37.18 points, or 0.6 percent, to 6,851.75 at the close in London, its highest level since Feb. 24. The benchmark slipped 0.1 percent last week. The broader FTSE All-Share Index climbed 0.6 percent today, while Ireland’s ISEQ Index added 0.3 percent.

“With miners, it would be JPMorgan adding a bit of strength, and companies like Petrofac may be up because some people may be bargain hunting,” Keith Bowman, an equity analyst at Hargreaves Lansdown Plc in London, said by telephone. “The M&A deals signal a degree of optimism. Investors are wondering what the next target might be.”

Voters in Ukraine’s eastern regions of Donetsk and Luhansk backed independence in a referendum yesterday, Russia’s state- run RIA Novosti reported. The U.S. and the European Union described the plebiscite as illegal. The acting government in Kiev plans to hold presidential elections on May 25.

Foreign ministers from EU member states agreed to sanction Russian companies, following a meeting in Brussels earlier today. They also decided to work on broader sanctions against Russia if it disrupts the upcoming poll.

The volume of shares changing hands in FTSE 100-listed companies was 26 percent lower than the 30-day average for this time of the day, according to data compiled by Bloomberg.

Commodity Producers

Twelve out of 14 members of the FTSE 350 Mining Index advanced today after JPMorgan raised its rating to overweight from underweight, meaning that investors should buy shares in commodity producers. The brokerage said the industry will probably more than halve capital spending between 2013 and 2015, increasing cash flow.

JPMorgan described Rio Tinto and BHP Billiton as the most attractive stocks in the industry. Rio Tinto added 4.8 percent to 3,340 pence, while BHP Billiton gained 2.7 percent to 1,948 pence. Copper and other industrial metals rose in London today.

Petrofac gained 3.5 percent to 1,218 pence. Canaccord Genuity Group Inc. raised the U.K.’s largest oil-and-gas engineer to buy from hold after the shares tumbled 20 percent last week.

BAT Climbs

British American Tobacco Plc advanced 1.2 percent to 3,458.5 pence. The maker of Lucky Strike cigarettes has asked Deutsche Bank AG and UBS AG to advise it on acquisitions, including potential deals with Reynolds American Inc. and Lorillard Inc., the Times reported, citing unidentified sources. BAT owns 42 percent of Reynolds American.

Anite Plc surged 10 percent to 91.5 pence, its biggest rally in two-and-a-half years. The maker of software for testing mobile devices forecast that full-year revenue and operating profit will be in line with expectations. The Sunday Telegraph reported that the company has begun exclusive talks to sell its travel business to LDC, the private-equity division of Lloyds Banking Group Plc.

Gem Diamonds Ltd. advanced 1.5 percent to 171 pence. The London-based diamond producer extracted 39 percent more carats at its Letseng mine in Lesotho in the first quarter than it did a year earlier. The company also said it sold more than 30,000 carats in the quarter, a 4 percent increase from last year.

BSkyB Retreats

BSkyB lost 2.4 percent to 868.5 pence. The U.K. pay-TV company, which is 39 percent owned by Fox, wants control of broadcasters Sky Deutschland AG and Sky Italia, according to people with knowledge of the matter. Fox owns about 57 percent of Sky Deutschland and 100 percent of Sky Italia.

Barclays Plc dropped 1.4 percent to 256.7 pence. Exane BNP Paribas lowered the lender to neutral from outperform, while Royal Bank of Canada reduced the shares to sector perform from outperform. Both ratings mean that investors should no longer increase their holdings.

Britain’s second-biggest bank said on May 8 that it will eliminate 7,000 posts at its investment bank, in addition to 12,000 job cuts across the wider group that it announced in February. RBC said the cost cutting may affect revenue.

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