U.K. Stocks Advance, Led by Tesco; BT Gains on Broker Upgrade

By Adam Haigh

June 16 (Bloomberg) -- U.K. stocks advanced for the first time in three days, led by Tesco Plc after the world’s third- biggest retailer said sales growth accelerated and as analysts recommended Royal Bank of Scotland Group Plc and BT Group Plc.

Tesco climbed 1.9 percent after reporting U.K. same-store sales rose in the first quarter. Royal Bank, Britain’s biggest government controlled-bank, and Lloyds Banking Group Plc rallied after Redburn Partners upgraded the stocks. BT, the U.K.’s largest phone company, added 4.7 percent as Morgan Stanley advised buying the shares.

“Tesco is going well,” said Anthony Grech, a market strategist at IG Index in London. “Banks too are rallying with RBS and Lloyds leading the way.”

The benchmark FTSE 100 Index climbed 32.46, or 0.8 percent, to 4,358.47 as of 12:28 p.m. in London. The FTSE All-Share Index added 0.7 percent and Ireland’s ISEQ Index advanced 0.9 percent.

The FTSE 100 has rebounded 24 percent from this year’s low on March 3 as banks and raw-material producers rallied on speculation the $12.8 trillion pledged by the U.S. government and Federal Reserve will end the deepest economic contraction since the Great Depression.

U.K. inflation slowed less than economists forecast in May after higher taxes and the weakness of the pound sustained price pressures in the economy. Consumer prices rose 2.2 percent from a year earlier, compared with 2.3 percent in April, the Office for National Statistics said today in London.

Tesco Gains

Tesco increased 1.9 percent to 362.9 pence. U.K. same-store sales rose 4.3 percent in the 13 weeks to May 30 excluding fuel and value-added tax. The pace compared with a 2.7 percent increase in the previous quarter. International sales rose 20.1 percent, helped by a weaker pound.

Royal Bank advanced 4.8 percent to 39.7 pence. Lloyds, the government-controlled bank that bought HBOS Plc, increased 5.1 percent to 70.2 pence.

Redburn Partners upgraded the stocks to “buy” and said “even the more dangerous deflationary scenario is priced in.”

BT added 4.7 percent to 99.4 pence. Morgan Stanley upgraded the stock to “overweight” from “equal-weight,” saying “cash flows could rebound strongly.”

“We see a 3-4 year target for the shares of around 190 pence, but the market could get there far sooner if it sees evidence of execution,” analysts including Nick Delfas wrote in the report.

British Land Co. added 2 percent to 400 pence. JPMorgan Chase & Co. raised the largest office developer in London to “overweight,” saying “revaluations of portfolios with long leases will surprise to the upside.”

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