U.K. stocks advanced for the time in six days, as investors snapped up bank shares trading near the lowest valuations on record and mining companies rallied with metal prices.
Royal Bank of Scotland Group Plc, the biggest U.K. government-controlled lender, surged 20 percent on speculation the terms of the government’s plan to insure banks’ assets will benefit private shareholders. Rio Tinto Group advanced more than 6 percent as copper rose in London. Rexam Plc and Shire Plc dropped more than 6 percent after reporting earnings, limited gains on the FTSE 100 Index.
The benchmark FTSE 100 added 11.54, or 0.3 percent, to 4,018.37, as a measure of bank shares climbed for the first time in five days. The FTSE All-Share Index rose 0.2 percent, while Ireland’s ISEQ Index slipped 0.2 percent.
“Investors are searching for any positive signs,” said Keith Bowman, an equity analyst at Hargreaves Landsdown Stockbrokers in London. “Sentiment is still fairly depressed and fragile for the time being. Markets are turning very quickly at the current time.”
RBS gained 20 percent to 21.8 pence, rebounding from yesterday’s 13 percent decline. Lloyds Banking Group Plc, which bought HBOS Plc, climbed 12 percent to 56.8 pence, snapping four days of declines. Barclays Plc, the U.K.’s third-biggest bank, increased 8.4 percent to 101.1 pence.
The government is negotiating with RBS over plans to insure about 90 percent of banks’ potential losses on assets that could erode capital, under an asset protection program outlined by the Treasury last month.
“It appears that share prices are being driven by speculation on how the insurance scheme will work and whether there will be some benefit to shareholders,” said Derek Chambers, an analyst at Standard & Poor’s Equity Research Ltd.
Bank shares in the FTSE 350 Index were valued yesterday at 3.18 times reported profits and 0.38 times net assets, near the lowest levels on record, according to data compiled by Bloomberg.
Rio Tinto, the world’s third-largest mining company, increased 6.2 percent to 2,000 pence as copper rallied in London on speculation a weaker dollar will strengthen demand for commodities as an alternative investment. Base metals including lead, nickel, tin and zinc also advanced.
BHP Billiton Ltd., the biggest mining company, added 2.3 percent to 1,180 pence. Xstrata Plc increased 2 percent to 719.5 pence.
Rexam, the world’s biggest maker of beverage cans, dropped 10 percent to 278.5 pence after the company reported higher-than- expected debt levels.
Rexam, which today reported increased earnings, said net debt at the year end was 2.6 billion pounds ($3.7 billion).
“Net debt came in well above our expectations,” wrote Kartik Swaminathan, a London-based analyst at Cazenove in a note to clients. “The outlook statement was cautious, with management focus resting on cash generation and costs.”
Shire, the maker of the Adderall hyperactivity treatment, lost 6.6 percent to 942.5 pence after fourth-quarter earnings and sales of Vyvanse failed to impress investors.
Earnings excluding some items were $1.01 per share, matching the median estimate of five analysts surveyed by Bloomberg. Adderall’s successor, Vyvanse, contributed $103 million to sales, narrowly beating the $102 million analyst estimate.
“Shire routinely beats consensus considerably,” Blue Oar Securities analyst Mick Cooper said. “The market gets wired to the fact that they are constantly surprising us on the upside, but we got them correct this time. Normally, they pull a rabbit out of a bag somewhere.”
The following stocks also gained or fell in the U.K. market. Stock symbols are in parentheses.
BAE Systems Plc (BA/ LN) rose 13.75 pence, or 3.6 percent, to 400 after Europe’s biggest defense company said full-year profit rose 94 percent to 1.75 billion pounds after wars in Iraq and Afghanistan spurred demand for its armored vehicles, battlefield radios and bullet-proof vests. That beat analysts’ estimates.
Land Securities Group Plc (LAND LN) lost 15.5 pence, or 2.7 percent, to 552.5 after the U.K.’s largest real estate investment trust said plans to raise 755.7 million pounds to shore up its finances in the third rights offer by a U.K. property company this month.
Land Securities will sell about 291 million shares for 270 pence each. That’s 52 percent less than yesterday’s closing price.
Old Mutual Plc (OML LN) fell 6 pence, or 13 percent, to 41.1 pence. Lansdowne Partners Ltd. today disclosed a 0.39 percent short position in the U.K. insurer.
Reed Elsevier Plc (REL LN) gained 21.5 pence, or 4.1 percent, to 542 after the publisher of Variety and New Scientist magazines said profit rose last year on higher sales for its LexisNexis database, and predicted growth for 2009.
Adjusted profit climbed to 1.38 billion pounds, or 44.6 pence a share, from 1.14 billion pounds, or 35.9 pence, a year earlier. Analysts predicted 41.7 pence a share.