U.K. Stocks Head for Second Weekly Gain; Lloyds, Shell Advance

By Alexis Xydias

Oct. 16 (Bloomberg) -- U.K. stocks rose, headed for a second weekly gain. Lloyds Banking Group Plc led the advance after the lender agreed to sell its unprofitable chain of real- estate agencies and Deutsche Bank AG advised buying the shares.

Royal Dutch Shell Plc paced energy shares higher as oil prices spiked and following a rally in U.S. refiners’ stocks.

The benchmark FTSE 100 Index added 25.76, or 0.5 percent, to 5,248.71 as of 9:58 a.m. in London, poised for a weekly gain of 1.7 percent. The FTSE All-Share Index also rose 0.5 percent today and Ireland’s ISEQ Index increased 0.7 percent.

Stocks extended a seven-month rally this week as U.S. companies from JPMorgan Chase & Co. to Google Inc. reported earnings that beat estimates, adding to speculation the global economic recession has abated.

“The earnings story that is emerging here supports our theory that earnings numbers are too low,” said Ian Richards, London-based equity strategist at Royal Bank of Scotland Group Plc. “Forecasts have generally not kept pace with improving macro conditions. We see European earnings growth exceeding 30 percent next year.”

Lloyds rose 4.6 percent to 95.65 pence. The U.K.’s biggest mortgage lender agreed to sell the Halifax real-estate agencies to LSL Property Services Plc for 1 pound ($1.60). Halifax Estate Agencies Ltd. has 218 offices and 1,050 employees throughout the country, London-based Lloyds said today. The effect on Lloyds’ earnings isn’t expected to be material, the bank added.

Shell

Separately, the shares were raised to “buy” from “hold” at Deutsche Bank, which cited the stock’s valuation. London- based analyst Jason Napier raised his price estimate on Lloyds shares to 115 pence from 100 pence in a note to investors.

Shell, owner of Europe’s biggest oil refinery, climbed 2 percent to 1,876.5 pence. Tullow Oil Plc, the U.K. explorer with the most licenses in Africa, rose 2.1 percent to 1,240 pence. Petrofac Ltd., the oil-services provider whose shares have almost tripled this year, climbed 2.6 percent to 1,020 pence.

Oil futures in New York jumped 3.2 percent to $77.58 a barrel yesterday, with most of the gain coming after European stock markets had closed.

Sunoco Inc., the largest refiner in the U.S. Northeast, and Valero Energy Corp., the biggest in the country, both gained more than 7 percent yesterday after the Department of Energy reported U.S. inventories of oil tumbled 5.23 million barrels last week, almost five times the decline forecast by analysts and the biggest drop in a year.

BlueBay

BlueBay Asset Management Plc advanced 2.7 percent to 352.3 pence. The London-based manager of fixed-income funds said the money it oversees climbed 28 percent in the third quarter as investors moved out of cash looking for a higher yield.

Capital & Regional Plc added 4.1 percent to 38 pence. Shares in the U.K. shopping mall and leisure center operator were upgraded to “overweight” by analysts at JPMorgan, who cited a better outlook for the industry than investors are expecting.

National Express Group Plc tumbled 26 percent to 348.7 pence, poised for the steepest decline since 2001, after CVC Capital Partners Ltd. said its group decided not to make an offer for the transport company.

Under the terms of the original offer, CVC had planned to sell National Express’s U.K. bus and rail units to Perth, Scotland-based Stagecoach Group Plc, the operator of South West trains, Britain’s biggest single rail franchise. Shares in Stagecoach, which said today it is no longer in talks with CVC about those assets, dropped 4.8 percent to 156.5 pence.

To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net.