MW: U.K. shares rebound as mining, oil stocks gain
Carnival shares rise; construction stocks volatile after competition fines
LONDON (MarketWatch) -- U.K. stocks reverted to their recent upward trend Tuesday as strong gains for natural resources companies helped the region recover from the previous session's losses, though construction stocks were volatile after several firms were fined by the competition regulator.
Mining stocks posted strong gains, with BHP Billiton (UK:BLT 1,725, +21.50, +1.26%) (BHP 66.48, +0.90, +1.37%) gaining 1.7% and Anglo American (UK:AAL 2,085, +34.50, +1.68%) adding 1.8% as commodity prices strengthened.
Rio Tinto (UK:RIO 2,724, +77.00, +2.91%) (RTP 178.52, +4.29, +2.46%) added 3.1% after it also announced a deal to sell its Alcan Composites business to Switzerland's Schweiter Technologies (CH:SWTQ 499.00, +59.00, +13.41%) for $349 million.
Oil and gas heavyweights BP (UK:BP. 563.10, +6.00, +1.08%) (BP 55.31, +0.90, +1.65%) and Royal Dutch Shell (UK:RDSA 1,816, +24.57, +1.37%) (RDS .A 59.47, +0.71, +1.21%) rose 1.1% and 0.9% respectively as oil prices climbed.
The October-dated light-crude contract climbed $1.80 to $71.51 a barrel, helped by a weak performance by the dollar against its major rivals. See full story.
The U.K.'s main FTSE 100 index (UK:UKX 5,166, +31.15, +0.61%) rose 31.15 points, or 0.6%, to 5,165.51. Other European markets also posted solid gains. Also see Europe Markets.
Mervyn Douglas, who runs the U.K. Focus Fund at Aviva Investors, said he prefers equities to cash and government bonds. But he also said the market is nearing an end to the phase where early-stage cyclicals outperformed.
One of his concerns is that strategists are bringing GDP and earnings forecasts higher but not moving up interest-rate-hike expectations. "So far it's a perfect Goldilocks world, but I don't think that's sustainable."
Among other gainers, shares in Carnival (UK:CCL 2,171, +108.00, +5.24%) (CCL 34.22, +2.22, +6.94%) rose 5.1% after it reported a nearly 20% drop in quarterly profit, but still topped market expectations and lifted its earnings forecast for the year. See full story.
Merrill Lynch also added the cruise-ship operator to its "Europe 1" list of preferred stocks just ahead of its results.
The broker said it sees "significant opportunities" for net-revenue-yield improvement and believes the company offers an attractive way of playing a U.S.-led consumer recovery.
Construction stocks were volatile after the Office of Fair Trading said it fined 103 firms 129.5 million pounds ($209.7 million) for alleged collusion on building contracts between 2000 and 2006.
Shares in Kier Group (UK:KIE 1,268, -25.00, -1.93%) and Carillion (UK:CLLN 282.00, -6.30, -2.19%) dropped more than 2% and Balfour Beatty (UK:BBY 339.90, -0.50, -0.15%) fell 0.5% after they all received bigger-than-average fines. See full story.
Among other movers, Misys (UK:MSY 201.60, +4.85, +2.48%) rose 2.2% after UBS upgraded the software company to buy from neutral, saying the stock has underperformed compared to peers such as Sage (UK:SGE 226.00, +1.40, +0.62%) and Logica (UK:LOG 135.00, +2.40, +1.81%) .
Pharmaceuticals group Shire (UK:SHP 1,095, +26.00, +2.43%) also benefited from a broker upgrade after it was lifted to hold from underperform by Jefferies International, which cited the company's forecast for earnings-per-share growth of more than 20% from the second quarter of 2010.
Shares in the pharmaceuticals company rose 2.3%.
Defensive stocks such as utilities were also among the weaker performers, with water companies Severn Trent (UK:SVT 975.00, -22.50, -2.25%) and United Utilities (UK:UU. 453.30, -12.22, -2.62%) both dropping more than 2%.
