U.K. Stocks Rise Most in 2 Months; Rio Tinto, Vodafone Advance

By Adam Haigh

June 30 (Bloomberg) -- U.K. stocks rose the most in two months, led by commodity producers, as oil climbed to a record and the Financial Times reported ArcelorMittal may buy a stake in Rio Tinto Group.

Vodafone Group Plc, the world's largest mobile-phone company, rallied after Credit Suisse Group AG strategists advised boosting investments in European telephone companies and MF Global Securities Ltd. recommended buying the shares. ICAP Plc, the U.K.-based broker of inter-bank transactions, advanced after Merrill Lynch & Co. advised clients purchase the stock.

The FTSE 100 rose 96, or 1.7 percent, to 5,625.9, trimming this year's drop to 13 percent. The measure had its biggest first-half decline since 1994 as rising oil prices and writedowns and credit-related losses at banks amounted to $400 billion globally. The FTSE All-Share Index climbed 1.5 percent today, while banks led Ireland's ISEQ Index to a 1.6 percent decline.

Rio Tinto, the world's third-biggest mining company, gained 2.8 percent to 6,009 pence.

ArcelorMittal could afford to buy a stake of similar size to the 9 percent stake, valued at about $14 billion, acquired in February by Aluminum Corp. of China and Alcoa Inc., the newspaper said, citing experts. Rio is subject of a hostile bid from BHP Billiton Ltd.

Mittal has considered joining the takeover battle for Rio through buying a stake or purchasing some iron ore assets should their sale be demanded by antitrust regulators, the newspaper said, citing a banker.

Haroon Hassan, a spokesman for ArcelorMittal in London, and Ian Head, a spokesman for Rio in Melbourne, declined to comment.

BHP Billiton, the world's largest mining company, added 2.4 percent to 1,920 pence.

Oil Rises

Royal Dutch Shell Plc, Europe's biggest oil producer, added 2.4 percent to 2,063 pence, and BP Plc, the region's second- largest, climbed 3.2 percent to 583.25 pence.

Crude oil rose to a record $143.67 a barrel on concern Israel may attack Iran over its nuclear program and disrupt supply from OPEC's second-largest producer.

Vodafone rallied the most since November, gaining 5.3 percent to 149.15 pence. Credit Suisse strategists recommended owning 30 percent more phone shares than their representation in benchmarks, saying the industry is likely to be more shielded than others from a decline in earnings. The previous advice was to ``overweight'' the industry by 5 percent, according to the note.

Separately, MF Global upgraded the stock to ``buy'' from ``hold.''

ICAP climbed 2.4 percent to 542 pence as Merrill upgraded the stock to ``buy'' from ``neutral.''

``There is now a useful gap between what we see as a conservative valuation of ICAP and the current share price,'' London-based analyst Philip Middleton wrote in a note to clients today.

Housing Slump

Irish Life & Permanent Plc tumbled 10 percent to 6.61 euros. Ireland's biggest mortgage lender had its long-term credit rating lowered to A from A+ by Standard & Poor's, which cited dependence on wholesale funding.

S&P also lowered its outlook on Allied Irish Banks Plc, Bank of Ireland Plc and Anglo Irish Bank Plc, Ireland's three largest banks. Allied Irish fell 2 percent to 9.80 euros, Bank of Ireland retreated 5.6 percent to 5.52 euros and Anglo Irish slumped 8.5 percent to 5.95 euros.

Irish mortgage lending rose at the slowest pace in 16 years in May, and falling home prices reduced demand for loans, the central bank said today.

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

ClinPhone Plc (CNP LN) dropped the most since November, losing 5.2 percent to 132.75 pence. Quintiles Transnational Corp. said it won't proceed with an offer for computer software-maker ClinPhone, leaving the door open for Parexel as the sole bidder.

Pendragon Plc (PDG LN) tumbled the most since November, falling 23 percent to 15 pence, the lowest price since 2001. Britain's biggest car dealership chain said a slump in auto sales means it's too difficult to give a profit forecast for this year.

Sibir Energy Plc (SBE LN) surged the most since June 2006, gaining 9.1 percent to 814 pence. The London-listed company that explores for oil in Russia said profit more than tripled last year to $277.8 million.

Southern Cross Healthcare Group Plc (SCHE LN) plunged the most ever, losing 59 percent to 130 pence. The U.K. care-home operator cut full-year profit goals and said credit woes are hampering the repayment of a loan.

TDG Plc (TDG LN) rose the most since May 9, gaining 7.2 percent to 231.5 pence. The board of the U.K. trucking company that transports frozen food for J Sainsbury Plc recommended investors accept a 203 million-pound ($404 million) takeover bid by Laxey Partners Ltd.

Trinity Mirror Plc (TNI LN) tumbled the most ever, falling 28 percent to 109 pence. The publisher of the U.K.'s Daily Mirror newspaper said 2008 operating profit will be about 10 percent lower than forecast as advertisers reduce spending.

To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net.
Last Updated: June 30, 2008 12:59 EDT