U.K. Stocks Rise, Led by Sainsbury; BOE Signals More Rate Cuts

By Adam Haigh

Nov. 12 (Bloomberg) -- U.K. stocks rose after the Bank of England signaled it is prepared to cut interest rates again, profit at J Sainsbury Plc beat estimates, and Dresdner Kleinwort said the peak of the financial crisis has passed.

Sainsbury, the third-largest U.K. supermarket chain, added 5.1 percent, the most in three weeks. Scottish & Southern Energy Plc gained 4.7 percent after the U.K.'s second-biggest energy supplier raised its interim dividend and predicted a full-year dividend of at least 66 pence.

The benchmark FTSE 100 Index added 27.73, or 0.7 percent, to 4,274.42 at 12:54 p.m. in London, bringing its loss this year to 34 percent. More than $2 trillion has been erased from the value of U.K. equities, as credit losses and writedowns totaled $918 billion worldwide in the worst financial crisis since the Great Depression. Shares on the benchmark index yesterday traded at 7.6 times estimated earnings against a 27.6 average over the last 10 years, a 72 percent discount.

``This is a once in a blue moon buying opportunity,'' said Greg Smith, managing director of investment adviser Fat Prophets U.K. Ltd. in London. ``It's difficult for us to see how you can't come out of this well, if you are buying for the long term.''

Bank of England Governor Mervyn King said policy makers are ``certainly prepared to cut bank rate if that proves to be necessary'' to hit the central bank's 2 percent inflation target. He indicated the central bank would be prepared to push its benchmark to zero if necessary.

BNP Paribas SA, Barclays Capital and JPMorgan Chase & Co. said the U.K. central bank will bring the main rate to 2 percent from the current 3 percent at the next scheduled decision on Dec. 4.

Equities Upgraded

Inflation will fall ``well below'' the bank's goal from the middle of 2009 and gross domestic product will contract by an annual 1.8 percent in the first three months of the year, forecasts by the Bank of England released today in London show. The predictions are based on market expectations of the interest rate just above the current 3 percent in the next quarter.

Dresdner Kleinwort raised its recommendation for European and U.K. equities to ``neutral'' saying the financial crisis may have peaked last month.

Sainsbury climbed 5.1 percent 286 pence. Profit rose 5.6 percent in the first six months as price cuts drew shoppers seeking to spend less.

Scottish & Southern added 4.7 percent to 1,209 pence. Pretax profit for the first half was 302.6 million pounds, in line with the 302.5 million-pound median estimate of six analysts surveyed by Bloomberg News. The company said it will raise its interim dividend 9.4 percent to 19.8 pence a share and predicted a full- year dividend of at least 66 pence.

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

Amec Plc (AMEC LN) gained 1.2 percent to 499 pence. The provider of services for the world's largest energy companies expects a group margin for earnings before interest, tax and amortization ``in excess of 6.5 percent'' for 2008 amid continuing strength in demand.

Charter International Plc (CHTR LN) tumbled 87.25 pence, or 22 percent, to 302.5 after saying 2008 results will miss its previous targets on weaker orders for welding and cutting tools.

Morgan Crucible Co. (MGCR LN), which provides body armor to the U.K. Ministry of Defence, rallied 6.7 percent to 99 pence after saying it will cut costs and make ``selective'' job reductions at units serving industrial clients as the economic slowdown crimps demand.

Moss Bros Group Plc (MOSB LN) surged 9.25 pence, or 59 percent, to 25 pence after Philip Green, the billionaire owner of U.K. retailer Arcadia Group Ltd., bought a 28.5 percent stake in the U.K.'s third-largest suit seller.

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