UK stocks rose amid financial worries

U.K. stocks rose for the first time in three days as investors bought shares of companies whose earnings are less dependent on growth amid signs the economy is deteriorating.
The U.K.’s FTSE 100 rose 1.1 percent as Imperial Tobacco Group Plc rallied. Imperial Tobacco Group Plc, Europe’s second-largest cigarette maker, added 2.6 percent, while Diageo Plc, the world’s biggest liquor company, gained 2.5 percent.

I’m favoring “companies that aren’t completely economically insensitive but are a lot less sensitive,” Jane Coffey, head of equities at Royal London Asset Management Ltd., which manages about $10.5 billion, said in a Bloomberg television interview.

BAE Systems Plc, Europe’s biggest defense company, climbed 5 percent to 359.5 pence as the brokerage said “defense stocks offer good visibility for the next two years,” predicting “strong” earnings-per-share growth in 2009 and further growth in 2010. Goldman has a “buy” recommendation on BAE shares.

The U.K. economy shrank more than expected in the third quarter as service industries including financial companies, hotels and restaurants declined the most since 1990.

Gross domestic product dropped 0.6 percent from the second quarter, the biggest decline in almost 18 years, the Office for National Statistics said today in London. The result was lower than the previous estimate for a drop of 0.5 percent, which economists had expected would be confirmed.