U.K. Stocks Rebound From Three-year Low; Xstrata, Miners Rally

By Sarah Jones

Sept. 30 (Bloomberg) -- The U.K.'s FTSE 100 Index rebounded, trimming its biggest monthly slump since 1987, on speculation the U.S. government's $700 billion bank rescue plan will be revived and as mining shares rallied.

Standard Chartered Plc and Old Mutual Plc climbed after the shares fell more than 10 percent yesterday. Xstrata Plc and Rio Tinto Group advanced as investors judged a sell off of as much as 19 percent was overdone.

The benchmark FTSE 100 index added 83.68, or 1.7 percent, to 4,902.45 having swung between gains and losses at least 16 times in the session. The index lost 5.3 percent yesterday, sending the gauge to the lowest since 2005.

``I think a deal will be made by the end of the week,'' said Philip Manduca, who helps manage $2 billion as head of investments at ECU Group Plc in London. ``I don't think we will see as much smash and grab'' on the markets like yesterday.

The FTSE All-Share Index added 1.6 percent. Ireland's ISEQ Index advanced 7.9 percent after the government said it will guarantee Irish bank's deposits and debts for two years.

The House of Representatives voted 228 to 205 against the bail out plan overnight. Even so Judd Gregg, the Senate Banking Committee's ranking Republican, and Barack Obama said a deal will eventually pass.

``Expectations are that this bail out will get rubber stamped sooner rather than later,'' said Anthony Grech, a London- based market strategist at IG Index. ``It would be somewhat over optimistic to expect that this rescue plan will be the answer to all of the current problems.''

Black Monday

The FTSE 100 has dropped 13 percent this month, its worst monthly retreat since the so-called Black Monday stock market crash in October 1987, when the gauge slumped 29 percent. Indexes retreated as bank bailouts worldwide accelerated and the proposed bailout plan to rescue U.S. financials failed to unlock money markets.

Standard Chartered, the U.K. bank that gains most of its profit in Asia, increased 8 percent to 1,345 pence, rebounding from an 11 percent sell off yesterday. Old Mutual, the insurer that replaced its chief executive officer this month after announcing additional losses, added 8.9 percent to 77 pence.

Xstrata, the world's fourth-largest copper producer, climbed 8.8 percent to 1,716 pence, recovering some of yesterday's 17 percent drop. Rio Tinto, the third-biggest mining company, added 4.9 percent to 3,471 pence. Anglo American Plc, the world' fourth-largest diversified mining company, rose 2.2 percent to 1,855 pence as Goldman Sachs Group Inc. added the shares to its ``conviction buy'' list.

The Dow Jones Stoxx Basic Resource Index yesterday was valued at 6.8 times earnings, the cheapest this decade, data compiled by Bloomberg show.

`Rescued'

HBOS Plc, the mortgage bank being acquired by Lloyds TSB Group Plc, declined 14 percent to 122.4 pence, widening the gap between its market value and the price that Lloyds TSB agreed to pay in a stock swap.

``HBOS isn't a done deal until Lloyds' shareholders vote for it,'' said Leigh Goodwin, an analyst at Fox-Pitt, Kelton Ltd. in London. ``There's a part of the market that thinks that if the deal didn't go through, HBOS would need to be rescued.''

Bank of Ireland Plc, Ireland's second-biggest lender, jumped 21 percent to 3.95 euros. Anglo Irish Bank Corp. Plc, the third- largest, soared 63 percent to 3.844 euros. Both stocks fell as much as 20 percent yesterday.

The Irish government said it will guarantee all deposits, covered bonds, senior debt and dated subordinated debt of four publicly traded banks and two building societies.

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

Enterprise Inns Plc (ETI LN) jumped 21.25 pence, or 14 percent, to 178.5 after Chief Executive Officer Ted Tuppen said the company, Britain's second-biggest pub landlord, is ``entirely happy'' with its financing structure.

The pub owner has ``very long-term secure debt,'' Tuppen said today by telephone, easing concern among investors over the company's borrowings. Enterprise plans to reduce spending on renovation work and acquisitions and will focus on selling ``underperforming pubs,'' he said.

IG Group Plc (IGG LN) increased 32.5 pence, or 12 percent, to 313.75, rebounding from yesterday's 12 percent decline. UBS AG upgraded the company, which takes bets on financial markets under the IG Index name, to ``buy'' from ``neutral.''

ITV Plc (ITV LN) increased 1 pence, or 2.4 percent, to 42 after the U.K.'s biggest commercial broadcaster said it will cut a total of about 1,000 jobs in 2008 and early 2009 as it's ``on track'' to deliver targeted cost savings.

The cuts, which include disposals, will lead to about 430 job losses at the company's news operations, the company said.

RAB Capital Plc (RAB LN) gained 1 pence, or 5.1 percent, to 20.5 after the company won a vote to freeze client redemptions for three years, stopping the liquidation of its flagship hedge fund after its value fell by half this year.

Investors in RAB's Special Situations fund approved the plan by a ``considerable margin,'' the company said.

Tesco Plc (TSCO LN) increased 17.7 pence, or 4.8 percent, to 387.6. The U.K.'s biggest supermarket company reported first-half profit that beat analysts' estimates after cutting prices to retain British shoppers concerned about their finances.

To contact the reporter on this story: Sarah Jones in Copenhagen at sjones35@bloomberg.net;