By Steve Goldstein, MarketWatch
British stocks advanced on Friday ahead of a pivotal speech on U.S. interest rates, as one strategist said it was dangerous to bet against the U.K.
The U.K. FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX -0.31% rose 0.77% to 7183.09, and U.S. stock futures /zigman2/quotes/209948968/delayed ES00 +1.99% also rose after the Dow industrials /zigman2/quotes/210598065/realtime DJIA +1.85% climbed by nearly 50 points on Thursday.
Federal Reserve Chairman Jerome Powell is due at 10 a.m. Eastern Time to address the Jackson Hole conference on challenges for monetary policy. After European markets close, Bank of England Governor Mark Carney also will address the venue.
Credit Suisse strategist Andrew Garthwaite said the risks are skewed against being underweight U.K. equities. He said the U.K. equity market is 13% cheap on its model, valuations are close to 20-year lows on some measures such as dividend yield, outflows have been extreme and risk appetite is the lowest of any region.
The U.K. also has high defensive exposures, Garthwaite said, recommending “cheap international plays” like Ashtead /zigman2/quotes/200232063/delayed UK:AHT -2.75% , Associated British Foods /zigman2/quotes/204493701/delayed UK:ABF -1.09% and Ferrexpo /zigman2/quotes/208342608/delayed UK:FXPO +0.73% and select domestic plays like International Consolidated Airlines Group /zigman2/quotes/208070069/delayed UK:IAG -5.69% , easyJet /zigman2/quotes/202825892/delayed UK:EZJ -4.85% , SSE /zigman2/quotes/204546319/delayed UK:SSE -0.57% and Drax /zigman2/quotes/206157741/delayed UK:DRX -4.38% .
Peppa Pig owner Entertainment One soared 31% to 583 pence in London after receiving a 3.3 billion pound, or 560 pence a share, cash offer from Hasbro. The market is pricing in the possibility of a counteroffer.
ITV /zigman2/quotes/205378065/delayed UK:ITV +0.26% , which in 2016 tried to buy Entertainment One, climbed 4.7%.