U.K. Stocks Climb, Led By Northern Rock; British Airways Gains

Sept. 27 (Bloomberg) -- U.K. stocks rose for a second day, led by banks after a newspaper reported JC Flowers & Co. LLC made a takeover approach for Northern Rock Plc. HBOS Plc and Alliance & Leicester Plc paced the advance.

British Airways Plc climbed after the airline ordered new planes to keep pace with rival Virgin Atlantic Airways. Marks & Spencer Group Plc paced a rally in retail stocks.

The FTSE 100 Index gained 53.4, or 0.8 percent, to 6486.4. The FTSE All-Share Index rose 0.9 percent to 3325.87. Ireland's ISEQ Index jumped 2.3 percent to 7792.98.

Northern Rock, which sought emergency funding this month, added 6.3 percent to 193.5 pence. The Daily Telegraph reported that JC Flowers has been given access to the U.K. mortgage lender's books after making a takeover proposal for the bank.

Flowers' approach may be the only one that will keep the bank as one entity, the Telegraph said, without saying where it got the information.

Moody's Investors Service today said Northern Rock is likely to be acquired saying the bank ``still has attractive assets.''

HBOS Plc, Britain's biggest mortgage bank, added 4.9 percent to 916 pence. Alliance & Leicester Plc increased 8.5 percent to 795 pence. The shares have dropped more than 30 percent since reaching their highest this year in May.

``There seems to be more confidence in the banking sector, which has also seen Alliance & Leicester rally towards more sensible levels,'' said David Buik, market analyst at BGC Partners in London.

RBS, British Airways

Royal Bank of Scotland Group Plc gained 2.2 percent to 528 pence as the bank's notes financing the bid for ABN Amro Holding NV surged on the first day of trading.

Investors returning to the credit markets after the slump in July and August ordered about nine times more than the $7 billion borrowed by the Edinburgh-based bank, a spokesman said.

British Airways climbed 4.1 percent to 384.25 pence. Europe's third-largest airline has agreed to buy 36 Airbus SAS and Boeing Co. planes valued at $8.2 billion to add flights from London's Heathrow airport.

Marks & Spencer, Britain's largest clothing retailer, added 4.1 percent to 612.5 pence. Home Retail Group Plc, owner of the Argos and Homebase chains, gained 4.5 percent to 372.5 pence.

U.K. retail stocks advanced as investors said a four-month slide caused by concern about shrinking consumer spending may have gone too far.

M&S, Home Retail

``Many of them have been underperforming recently,'' said Claire Collingwood, a trader at CMC Markets in London. ``With the sector trading quite weak, we are seeing bargains picked up.''

The FTSE 350 General Retailers Index, which has fallen 22 percent since reaching a record on May 9, climbed 3.2 percent today.

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

Erinaceous Group Plc (ERG LN) plunged 5.5 pence, or 9.4 percent, to 53 after the real estate services company which has broken its loan agreements said today it had a loss in the first half. The company said it is in talks with its banks and may need additional funds in unforeseen circumstances.

Jessops Plc (JSP LN) surged 3.45 pence, or 39 percent, to 12.25. The camera retailer, whose shares have lost most of their value this year, said Chief Executive Officer Chris Langley quit. The company also said it will meet its full-year loss forecast.

The company reiterated it expects a loss of 7.5 million pounds, excluding exceptional costs.

Prudential Plc (PRU LN) climbed 14.5 pence, or 2 percent, to 746.5 after Bear Stearns upgraded the insurers' shares to ``outperform'' from ``peer perform,'' citing strong cash flow.

Silverjet Plc (SIL LN) dropped 5 pence, or 5.8 percent, to 81.5 after a competitor said it sued the trans-Atlantic business- class airline over control of a Boeing Co. 767 airplane.

C First Class Corp., owner of FlyFirstClass, said it had a contract with FlyJet Ltd. for the use of a 767-200ER airliner until Silverjet bought FlyJet in November 2006 to take control of the plane, according to the lawsuit filed in federal court in New York.

Taylor Wimpey Plc (TW/ LN) rallied 17 pence, or 6.6 percent to 275 as the Nationwide Building Society said U.K. house prices rose at the fastest pace in three months in September, a sign higher credit costs have yet to affect homebuyers. Persimmon Plc (PSN LN) climbed 4.7 percent to 953 pence. Barratt Developments Plc (BDEV LN) gained 3.7 percent to 753.