U.K. Stocks Extend Rally; Prudential, Aviva, Burberry Climb

By Sarah Jones

Sept. 23 (Bloomberg) -- U.K. stocks advanced for a second day, as Cazenove recommended shares of life insurers and Burberry Group Plc’s chief executive officer said the retailer’s British business is “on fire.”

Prudential Plc, the U.K.’s biggest insurer by market value, and Aviva Plc led a measure of insurance stocks to the highest in almost a year as Cazenove upgraded the shares. Burberry, the U.K.’s largest luxury-goods maker, advanced 2.6 percent.

The benchmark FTSE 100 gained 0.4 percent to 5,160.34 at 11:02 a.m. in London, climbing for the 12th time in 14 days. The FTSE All-Share Index rose 0.3 percent and Ireland’s ISEQ Index fell 0.1 percent.

“Markets continue to rally,” said London-based Joshua Raymond, a strategist at City Index. “Whilst momentum is firmly towards the upside, the more we go higher the more susceptible we are to sharp and severe bouts of profit taking.”

The FTSE 100 has rebounded 47 percent since March 3 as companies reported earnings that beat estimates and economic releases added to evidence that the worst of a global recession may be over.

The Confederation of British Industry today forecast U.K. gross domestic product will rise 0.3 percent in the third quarter, reversing a June prediction for a drop of the same size. The business lobby also expects 0.4 percent growth in the last three months of the year.

Shares of Prudential advanced 1.8 percent to 574.5 pence, while Aviva, the U.K.’s second-biggest insurer, gained 1.4 percent to 418.7 pence. Smaller rival St James’s Place Plc added 0.7 percent to 236.4 pence.

Cazenove

Cazenove raised its recommendation for the three insurers to “outperform” from “in-line,” citing “potential for significant further upside” in the life insurance sector, driven by improving fundamentals and a recovery in earnings.

Analyst James Pearce also upgraded shares of Old Mutual Plc to “in-line” from “underperform.”

Burberry increased 2.7 percent to 489.6 pence after CEO Angela Ahrendts said the clothing maker’s U.K. business has been “on fire” as demand for luxury goods improves. Ahrendts spoke in an interview late yesterday at London Fashion Week.

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

Greene King Plc (GNK LN) dropped 19.5 pence, or 4.4 percent, to 428.4 after UBS AG downgraded the shares to “sell” from “buy,” saying an “optimistic” outlook on the U.K. economy is already “factored into current share prices.”

Analysts also recommended selling shares of Marston’s Plc (MARS LN), Mitchells & Butlers Plc (MAB LN) and Enterprise Inns Plc (ETI LN).

Marston’s was previously rated “buy” and Enterprise Inns and Mitchells & Butlers were cut from “neutral.”

Liberty International Plc (LII LN) dropped 43 pence, or 7.6 percent, to 521 after the U.K.’s largest shopping-center owner announced plans to raise 300 million pounds ($493 million) by selling shares for the second time in five months.

The company is raising capital to resume investments in buildings for the first time in a year as the commercial- property market recovers.

SABMiller Plc (SAB LN) fell 17 pence, or 1.1 percent, to 1,497 as shareholder Kulczyk Holding SA is selling as many as 6 million shares in the brewer through a Goldman Sachs Group Inc.- run placing, according to a term sheet for the sale.

To contact the reporters on this story: Sarah Jones in London at sjones35@bloomberg.net.