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U.K. Stocks Gain for Second Day; BHP Billiton, Xstrata Advance
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By Adria Cimino

Dec. 11 (Bloomberg) -- U.K. stocks advanced for a second day, trimming their weekly decline, as reports from China and the U.S. indicated the global economic recovery may be strengthening.

BHP Billiton Ltd., the world’s biggest mining company, and Xstrata Plc led basic-resources companies higher as metals prices rose. Mouchel Group Plc posted a record gain after the U.K road and infrastructure-maintenance company said it has made “good progress” this fiscal year.

The benchmark FTSE 100 Index rose 17.2, or 0.3 percent, to 5,261.57. The index has rebounded 50 percent since March and is heading for its biggest annual gain since 1997 as central banks cut interest rates to record lows and governments worldwide committed about $12 trillion to revive the economy. The FTSE All-Share Index increased 0.4 percent today and Ireland’s ISEQ Index added 1.8 percent.

“I believe in a year-end rally,” said Yves Marcais, a sales trader at Global Equities in Paris. “The economy is starting to improve. The market has found a bit of dynamism once again.”

China’s industrial production rose 19.2 percent in November from a year earlier, the statistics bureau said in Beijing, exceeding the 18.2 percent forecast by economists.

In the U.S., a Commerce Department report showed retail sales gained 1.3 percent in November and the Reuters/University of Michigan preliminary index of consumer sentiment climbed to 73.4 in December.

Weekly Decline

The FTSE 100 declined 1.1 percent this week after Standard & Poor’s Ratings Services cut its outlook for Spain and Fitch Ratings downgraded Greece’s sovereign debt rating and five of the nation’s banks.

“The market reaction was excessive,” Marcais said. “We knew certain countries had problems.”

Moody’s Investors Service said today it has no current plans to lower its top debt ratings on the U.S. and the U.K. after a report this week stated the sovereigns may “test the Aaa boundaries.”

BHP Billiton increased 1.4 percent to 1,875 pence and Xstrata, the world’s largest exporter of coal used by power stations, advanced 1.5 percent to 1,047 pence. Kazakhmys Plc, Kazakhstan’s biggest copper producer, rallied 2.2 percent to 1,253 pence. Copper, lead and nickel climbed in London.

Rio Tinto Group added 1.3 percent to 3,134 pence. The second-largest iron ore exporter appointed a new chief negotiator with Asian steelmakers after price talks failed with China this year, boosting prospects for the latest negotiations.

‘Sense of Normality’

“Some sense of normality has returned to the market, with the miners as ever helping to drag the index up,” David Jones, chief market strategist at IG Index, wrote in a note.

Mouchel surged 19 percent to 190 pence, the biggest gain since its 2002 initial public offering. The company said it has made “good progress” since the fiscal year ended on Aug. 1 and expects to deliver performance in line with management forecasts in the 12 months through July 2010.

Carillion Plc advanced 1.9 percent to 300.9 pence. Britain’s second-biggest construction company said it anticipates profit increasing “at least” 10 percent this year on “very good” Middle East sales and aims for “single-digit” profitability next year.

Dragon Oil Plc slipped 3.4 percent to 379.75 pence, dropping for a fifth day. The Dubai-based explorer operating in Turkmenistan said the resolution to become a wholly owned subsidiary of Emirates National Oil Co., Dubai’s government- owned refiner, was not passed by the required majority at a shareholders’ meeting today.

Producer Prices

U.K. producer prices rose at the fastest annual pace in nine months in November after raw material costs increased, a sign inflation pressures are building as the recession eases.

The prices of goods at factory gates climbed 2.9 percent from a year earlier, the Office for National Statistics said today. The result matched the median forecast of 16 economists in a Bloomberg News survey. From October, prices increased 0.2 percent, in the ninth consecutive monthly gain.

To contact the reporter on this story: Adria Cimino in Paris at [e-mail].
Last Updated: December 11, 2009 12:01 EST