U.K. Stocks Drop, Led by Commodity Producers on Growth Concerns

By Sarah Jones

Aug. 26 (Bloomberg) -- U.K. stocks retreated the most in more than a month on concern falling commodity prices and a slowing economy will crimp earnings prospects for raw material producers.

Royal Dutch Shell Plc and BP Plc declined as Societe Generale SA lowered its U.K. growth forecast and a report yesterday said the International Monetary Fund cut its prediction for euro-area economic growth. BHP Billiton Ltd. and Anglo American Plc led a retreat by mining companies.

The FTSE 100 Index sank 132.2, or 2.4 percent, to 5,373.4 at 9:08 a.m. in London as all but five stocks fell. The FTSE All- Share Index slid 2.3 percent and Ireland's ISEQ Index declined 0.7 percent.

The U.K. market, which was closed yesterday for a public holiday, followed Europe lower on concern credit losses will spread and the economic slowdown will deepen.

Societe Generale cut its forecast for U.K. gross domestic product in 2009 to 0.5 percent from 1.2 percent, saying the economy is ``weakening rapidly and inflation is likely to peak in October, before collapsing in 2009.''

The IMF cut the euro-region's growth outlook this year to 1.4 percent from 1.7 percent, Reuters reported yesterday, citing a note prepared for a meeting of officials from the Group of 20 nations.

Shell, Europe's largest energy company, declined 2.7 percent to 1,840 pence. BP, the second-largest, fell 1.9 percent to 509.5 pence. Crude oil for October delivery tumbled 5.4 percent to $114.59 a barrel in New York on Aug. 22.

BHP, the world's largest mining company, lost 3.1 percent to 1,646 pence. Anglo American Plc, the second-biggest, lost 3.9 percent to 2,763 pence. Rio Tinto Group, the third-largest, lost 2.8 percent to 5,035 pence.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.