U.K. Mining Stocks Rally, Led by Rio Tinto; BT, Barclays Drop

U.K. mining stocks gained after BHP Billiton Plc, the world's biggest mining company, said its offer to buy Rio Tinto Group was rejected, fueling speculation of consolidation in the industry.

Barclays Plc, Britain's third-biggest bank, followed European financial stocks lower after Morgan Stanley said the outlook for credit markets has worsened. BT Group Plc, the U.K.'s largest phone company, declined after earnings missed analysts' estimates.

The FTSE 100 Index climbed 11.1, or 0.2 percent, to 6,396.2 at 1:03 p.m. in London. The FTSE All-Share Index gained 0.1 percent to 3,288.03. Ireland's ISEQ Index fell 1.2 percent to 7,103.1.

``After lots of speculation, at last we see concrete bid interest for Rio from BHP,'' said Espen Furnes, who helps manage the equivalent of $7.1 billion at Storebrand Asset Management in Oslo. ``This increases the likelihood of more consolidation in the sector, with Xstrata being a likely target.''

Rio Tinto, the world's third-biggest mining company, surged 24 percent to 5,378 pence, a record high, while Xstrata Plc, the world's fourth-biggest nickel miner, added 9.7 percent to 3,537 pence. Antofagasta Plc, the copper producer controlled by Chile's Luksic family, gained 6.8 percent to 833.5 pence.

``This deal will happen, it's just a question of time,'' said Stephen Pope, chief global market strategist at Cantor Fitzgerald Europe in London, in a telephone interview. ``This deal is definitely up in the pantheon of the biggest M&A deals of all time.''
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