U.K. Stocks Gain for Second Day; HSBC, Royal Bank Lead Advance

By Sarah Thompson

Sept. 9 (Bloomberg) -- U.K. stocks rose, extending the FTSE 100 Index's steepest rally in eight months, led by banks as the Times reported the U.K. government may take steps to shore up the home-loan market.

HSBC Holdings Plc, Europe's biggest bank, gained 2.3 percent and Royal Bank of Scotland Group Plc advanced 5.3 percent after the newspaper said Chancellor of the Exchequer Alistair Darling is preparing to act on the U.K.'s housing finance market.

Vodafone Plc also advanced after the world's largest wireless company named Michel Combes as head of Europe amid a revamp of the company's organizational structure.

The FTSE 100 Index climbed 32.7, or 0.6 percent, to 5,479 at 2:08 p.m. in London. The FTSE All-Share Index added 0.5 percent while Ireland's ISEQ Index increased 1.8 percent.

The FTSE 100 surged 3.9 percent yesterday after the U.S. government said it will provide short-term funding to Fannie Mae and Freddie Mac and buy mortgage-backed securities. About half the daily average of shares changed hands on the benchmark index yesterday after a computer breakdown left traders unable to buy or sell stocks for most of the day.

``It's all about financials,'' said Espen Furnes, an Oslo- based fund manager at Storebrand Asset Management, which has the equivalent of $48 billion. ``The Freddie Mac/Fannie Mae nationalization takes away the worst-case scenario in the U.S. economy. This is the first good news for financials globally for a very long time. I don't think the U.K. banks are out of the woods yet, but think there are some bargains out there.''

HSBC climbed 2.3 percent to 914.25 pence. Royal Bank, the U.K.'s second-largest bank, jumped 5.3 percent to 257.5. Barclays Plc, the third-biggest, increased 5.9 percent to 375.75.

Vodafone Gains

Vodafone gained 2.3 percent to 138.8 pence. Combes joins Vodafone from French network operator TDF Group, where he has been chief executive officer, the Newbury, England-based company said.

The company also said management of Eastern Europe, the Middle East, Africa and Asia will be split in two beginning Jan. 1. Paul Donovan, who oversees those regions, will leave the company at the end of the year. The shares have fallen 26 percent this year.

British Land Plc rose 4.4 percent to 787.5, the highest in almost a month, and Land Securities Plc added 2.2 percent to 1,370 pence.

Lehman Brothers Holdings Inc. raised its ratings on the U.K.'s two largest real estate companies to ``overweight'' and raised its recommendation on the industry, saying the sector may have reached a bottom.

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

U.K. companies:

Alizyme Plc (AZM LN) added 3.67 pence, or 39 percent, to 13 pence, the steepest jump since 2003. The U.K. biotechnology company whose shares have dropped almost 80 percent since December gained on speculation it may be a takeover target for Japan's Takeda Pharmaceutical Co.

BG Group Plc (BG/ LN) added 16 pence, or 1.5 percent, to 1,109. The U.K.'s third-biggest oil and gas company said it won't increase or extend its hostile takeover offer for Origin Energy Ltd., Australia's biggest producer of natural gas from coal seams.

IG Group Holdings Plc (IGG LN) increased 9.75 pence, or 2.9 percent, to 342.25. IG, which takes bets on financial markets under the IG Index name, said first-quarter revenue gained 29 percent as increased stock market volatility prompted more gamblers to open accounts.

Imperial Tobacco Group Plc (IMT LN) advanced 44 pence, or 2.5 percent, to 1,819. Europe's second-largest cigarette maker raised $2.2 billion from a sale of bonds in euros and pounds, according to HSBC Holdings Plc, one of the banks managing the issue.

Lloyds TSB Group Plc (LLOY LN) gained 6.25 pence, or 2 percent, to 316.25. The U.K.'s biggest provider of checking accounts is ``comfortable'' it can maintain sufficient capital through 2012, Finance Director Tim Tookey said.

Omega Insurance Holdings Ltd. (OIH LN) added 4.5 pence, or 3 percent, to 153. The Lloyd's of London insurer said first-half profit rose 34 percent.

Qinetiq Group Plc (QQ/ LN) slid 17.75 pence, or 7.9 percent, to 205.75, the sharpest drop since at least 2006. The U.K. government is selling its entire stake in the U.K.'s largest defense-research company.

To contact the reporters on this story: Jonathan Browning in London jbrowning9@bloomberg.netSarah Thompson in London at sthompson17@bloomberg.net.