By Steve Goldstein
U.K. stocks advanced Wednesday, albeit in thin trading
conditions, as traders bet that the British recovery in the economy
can continue without interest rates being raised in the near
term.
The U.K. FTSE 100 closed up 0.7% to 5,320.26.
At 2:15 p.m. Eastern time -- well after the close of trading in
London -- the Federal Reserve is due to announce its interest-rate
decisions for the U.S. While no change in rates is expected,
markets will be on guard for any move in the language accompanying
the decision as well as looking to see if the central bank reins in
any of its liquidity provisions.
But economic reports have been on the encouraging side, as
euro-zone gauges of manufacturing and services sentiment rose to
multi-month highs and as jobless claims fell in the U.K. by 6,300
in November, the first drop since February 2008.
David Miles, a member of the Bank of England's Monetary Policy
Committee, said in a speech that interest rates it sets may be kept
lower as banks hold onto more capital.
Banks led the way, with Barclays (BCS) up 2.6% and HSBC Holdings
(HBC) up 1%. In addition to the low interest rate environment, a
published report suggested that the Bank for International
Settlements will phase in stricter capital requirements over a ten-
to twenty-year horizon.
A note from Nomura helped drive U.K. media stocks. The broker
said the late-cycle end of the media sector has lagged cyclicals
since the market turn in mid-March and now offers better value, as
it prefers professional publishers, agency and satellite/cable
sub-sectors and recommends avoiding direct and most of the
free-to-air TV companies.
Reed Elsevier , its top pick, rose 1.7%.
BSkyB fell 0.2% after Nomura downgraded the satellite
broadcaster to neutral from buy. BSkyB is 39% held by News Corp.,
which also owns MarketWatch, the publisher of this report.
Diageo (DEO) fell 0.8% to 1,057 pence after it was cut to hold
from buy at Deutsche Bank. The broker said the stock has reached
its 1,050 pence price target and the broader spirits industry is
challenged by modest volume growth, trading down, some destocking
and a collective cut to advertising and promotional spending.
In other news, Unilever (UL), which Deutsche Bank said it
prefers, named Bristol-Myers Squibb's Jean-Marc Huet as its next
chief financial officer. James Lawrence stepped down from the post
last week. Unilever shares rose 1.3%.
Outside the FTSE 100, Barratt Developments , Redrow and Taylor
Wimpey each rose between 4.9% and 6.9% as Citigroup upgraded all
three firms to buy from hold. The broker said house prices,
mortgage applications, housing transactions and consumer confidence
all have improved and the sector could even withstand a modest fall
in house prices without having to cut asset values.
Pubs operator Punch Taverns fell 4.7%. Managed pub sales fell
1.6% in the last 16 weeks ending Dec. 12, while those at leased
pubs tumbled around 11%.