British and Irish shares rise ahead of possible Fed stimulus action

BRITISH stocks climbed for the fifth day in six amid speculation the US Federal Reserve may announce more stimulus measures to help drive the world’s largest economy.

Carnival jumped 6.6% after reporting earnings that topped analyst estimates.

Burberry rallied 3.5%. Glencore International and Fresnillo climbed at least 3% as a gauge of mining shares rebounded from the biggest decline in two weeks.

The benchmark FTSE 100 Index gained 104.15, or 2%, to 5,363.71 at the close in London, recouping most of Monday’s 108.85-point selloff. The FTSE All-Share Index advanced 1.8% yesterday, while the ISEQ increased 1.5%.

“Equity markets are carefully pricing in further Fed stimulus,” said Will Hedden, a sales trader at IG Index in London. “The rumour mill remains a major driver of trader sentiment.”

The FTSE 100 fell as much as 0.8% earlier as Italy’s credit rating was cut to A from A+ by Standard & Poor’s, which cited weakening economic growth and a “fragile” government.

Investors are awaiting today’s Federal Open Market Committee meeting to see whether the Fed will provide more stimulus. The FOMC will likely decide to replace short-term Treasuries in its $1.65 trillion (€1.2trn) portfolio with long-term bonds, according to the majority of economists surveyed by Bloomberg. The move is known as “Operation Twist,” for its goal to bend the yield curve.

Carnival increased 6.6% to £21.45 after the world’s biggest cruise-ship operator reported third-quarter earnings and sales that exceeded the average analyst forecast. The company also said September bookings are holding up well.

Burberry paced a rally in European luxury-goods makers. The shares rallied 3.5% to £15 as Italian rival Prada SpA reported a 74% jump in first-half profit after demand in Asia soared. Burberry generates about a third of its revenue in the Asia Pacific region.

Glencore, the largest publicly traded commodities supplier, led a rebound in basic resources shares, rising 3.3% to 441.55 pence. Fresnillo increased 4.1% to £19.43 and Lonmin gained 1.7% to £11.86.

BAE Systems jumped 2.4% to 286.7 pence as Societe Generale raised its recommendation for the arms company to “buy” from “hold.”

Barratt Developments climbed 5.7% to 82.2 pence as Citigroup upgraded the homebuilder to “buy” from “hold.”

International Consolidated Airlines, the parent company of British Airways, lost 2.6% to 150.2 pence after rival Deutsche Lufthansa cut its full-year earnings forecast.

The German airline said it will deepen capacity cuts for the winter timetable after last month’s results were weaker than expected and forward bookings slumped.

Airlines advanced earlier as the International Air Transport Association raised its 2011 forecast for global airline profits by 73% because of stronger-than-expected demand in Europe and the Middle East.

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