U.K. Stocks Rally for Second Day; British Airways, Xstrata Rise

By Adam Haigh

July 30 (Bloomberg) -- U.K. stocks rose for a second day as declining oil prices lifted transport companies and Xstrata Plc forecast ``significantly stronger'' second-half output.

British Airways Plc, Europe's third-biggest airline, and Carnival Plc gained. Xstrata, the world's fourth-largest copper producer, led mining shares higher. Aviva Plc climbed after raising its dividend 10 percent.

``The market feels very good about itself,'' said David Buik, a market analyst at BGC Partners in London. ``Clearly the fall in oil has helped.''

The benchmark FTSE 100 Index advanced 59.6, or 1.1 percent, to 5,378.8 at 1:09 p.m. in London, the steepest gain in a week. The FTSE All-Share Index rose 1 percent and Ireland's ISEQ Index decreased 2.2 percent.

British Airways added 4.1 percent to 258.75 pence. Carnival, the world's largest cruise-line, gained 0.6 percent to 1,800 pence.

Crude oil fell from its lowest close in 12 weeks on speculation gasoline demand in Asia and the U.S. may slow after near-record prices reduced consumption.

Xstrata climbed 2.8 percent to 3,530 pence. The company expects a ``significantly stronger'' second-half output on improved copper and nickel production.

Rio Tinto Group, the world's third biggest mining company, added 2.8 percent to 5,279 pence. BHP Billiton Ltd., the largest, gained 2.1 percent to 1,675 pence.

Ferrexpo Plc, a producer of iron ore in Ukraine, jumped 7.1 percent to 283 pence after ArcelorMittal, the world's biggest steelmaker, reported second-quarter profit that exceeded analyst estimates.

Aviva added 7 percent to 499.5 pence. The U.K.'s second- largest insurer by market value increased its dividend to 13.09 pence.

The following stocks also gained or fell in the U.K. market. Stock symbols are in parentheses.

Admiral Group Plc (ADM LN) soared 54 pence, or 6.6 percent, to 879 after the car insurer and broker that owns the confused.com Web site reported first-half profit that beat analyst estimates.

Lloyds TSB Group Plc (LLOY LN) dropped 23.25 pence, or 7.2 percent, to 297.75. The lender reported worse-than-estimated profit and said the outlook for the mortgage market in the U.K., where the bank generates almost all its earnings, is deteriorating.

Irish companies:

Elan Corp. (ELN ID) slumped 5.56 euros, or 27 percent, to 15. The Irish drugmaker said an experimental Alzheimer's drug it developed with Wyeth was linked to a brain-swelling side effect in a study. Elan makes up more than 13 percent of Ireland's ISEQ index by market weighting.

To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net