By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- U.K. stocks rose on Monday after
better-than-expected business-activity data pointed to an
improvement in economic growth, although HSBC Holdings PLC weighed
on the benchmark index after disappointing earnings results.
The FTSE 100 index added 0.2% to 6,661.93, after posting a 1.4%
weekly gain on Friday.
Most shares traded in positive territory, helped higher by an
upbeat reading on the U.K. services sector. The Markit/CIPS
headline business-activity index rose to an over six-and-a-half
year high of 60.2 in July, up from 56.9 in June and beating
expectations of a 56 reading. A reading above 50 indicates
expansion, with the July data marking the seventh straight month
above the neutral mark.
"While this is only one month of data in Q3, it certainly
indicates that our current forecast of 0.5% GDP growth is on the
conservative side. The current level of the PMIs are, on a
mechanical projection, consistent with growth of 1.2% in Q3, a much
sharper acceleration than we, or indeed most forecasters, are
currently expecting," said Jens Larsen, chief European economist at
RBC Capital Markets.
While the data spurred optimism about the U.K. recovery, the
benchmark index failed to stage a solid rally as shares of
heavyweight bank HSBC (HBC) dropped 4%. The bank reported a 23%
rise in first-half net profit, but fell short of analyst
expectations. Meanwhile, revenue fell 7%.
Also in the banking sector, Lloyds Banking Group PLC (LYG)
climbed 3.8% after the Financial Times reported that the bank aims
to start paying out up to 70% of its earnings in dividends by about
2015. A representative from Lloyds was not immediately available to
comment.
Mining firms were also on the rise, after official Chinese data
out over the weekend showed the non-manufacturing Purchasing
Managers' Index rose to 54.1 in July from 53.9 in June, reversing
three consecutive months of declines. Meanwhile, HSBC's Services
Business Activity Index came in at 51.3 on Monday, staying above
the 50-point threshold that indicates an improvement in activity,
and unchanged from the level seen in the June survey.
Miners tend to move on growth indications from China as the
country is a major user of natural resources. Shares of Vedanta
Resources PLC rose 2.9%, Anglo American PLC picked up 1.6% and
Glencore Xstrata PLC (GLCNF) added 1%.
Outside the main index in London, shares of Thomas Cook Group
PLC added 5.4% after Citigroup lifted the travel agency to buy from
neutral.
Drax Group PLC rose 3.4% as Goldman Sachs lifted the utility
firm to buy and added it to the conviction list.
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