By Simon Kennedy
LONDON (Dow Jones)--U.K. stocks gave up some of their earlier
gains but still ended higher Tuesday as natural resources companies
led a rebound from the previous session's losses.
Mining stocks rose, with BHP Billiton (BHP) gaining 1% and Anglo
American adding 0.4% as commodity prices strengthened.
Rio Tinto (RTP) added 2.4% after it also announced a deal to
sell its Alcan Composites business to Switzerland's Schweiter
Technologies for $349 million.
Oil and gas heavyweights BP (BP) and Royal Dutch Shell (RDSA)
both rose 0.7% as oil prices climbed.
The October-dated light-crude contract climbed $1.80 to $71.51 a
barrel, helped by a weak performance by the dollar against its
major rivals.
The U.K.'s main FTSE 100 index rose 8.24 points, or 0.16%, to
5,142.60. Other European markets also posted solid gains.
Mervyn Douglas, who runs the U.K. Focus Fund at Aviva Investors,
said he prefers equities to cash and government bonds. But he also
said the market is nearing an end to the phase where early-stage
cyclicals outperformed.
One of his concerns is that strategists are bringing GDP and
earnings forecasts higher but not moving up interest-rate-hike
expectations. "So far it's a perfect Goldilocks world, but I don't
think that's sustainable."
Among other gainers, shares in Carnival (CCL) rose 5% after it
reported a nearly 20% drop in quarterly profit, but still topped
market expectations and lifted its earnings forecast for the
year.
Merrill Lynch also added the cruise-ship operator to its "Europe
1" list of preferred stocks just ahead of its results.
The broker said it sees "significant opportunities" for
net-revenue-yield improvement and believes the company offers an
attractive way of playing a U.S.-led consumer recovery.
Construction stocks were volatile after the Office of Fair
Trading said it fined 103 firms 129.5 million pounds ($209.7
million) for alleged collusion on building contracts between 2000
and 2006.
Shares in Kier Group and Carillion dropped more than 2% and
Balfour Beatty fell 0.7% after they all received
bigger-than-average fines.
Among other movers, Misys rose 2.6% after UBS upgraded the
software company to buy from neutral, saying the stock has
underperformed compared to peers such as Sage and Logica .
Pharmaceuticals group Shire also benefited from a broker upgrade
after it was lifted to hold from underperform by Jefferies
International, which cited the company's forecast for
earnings-per-share growth of more than 20% from the second quarter
of 2010.
Shares in the pharmaceuticals company rose 1.9%.
Defensive stocks such as utilities were also among the weaker
performers, with water companies Severn Trent and United Utilities
both dropping more than 1%.
Services Desk; Dow Jones Newswires; +44-20-7842-9319/9274