U.K. Stocks Decline; Barclays, Alliance & Leicester Retreat

By Sarah Thompson

Sept. 10 (Bloomberg) -- U.K. stocks fell for a second day after Lehman Brothers Holdings Inc., the fourth-largest U.S. securities firm, reported a $3.9 billion third-quarter loss.

Barclays Plc, the U.K.'s third-biggest bank, slid 6.8 percent. Alliance & Leicester retreated 4 percent. Old Mutual Plc plunged 4.4 percent after South Africa's biggest insurer said it will write down $135 million in the value of preferred stock in Fannie Mae and Freddie Mac.

The FTSE 100 Index retreated 48.7, or 0.9 percent, to 5,366.9 at 1:48 p.m. in London. The FTSE All-Share Index lost 1 percent, while Ireland's ISEQ Index decreased 2.6 percent.

Lehman said it plans to sell a majority stake in its investment-management unit as it struggles to survive a crisis of investor confidence. The company also said it would cut its dividend.

Barclays sank 24.75 pence to 341. Alliance & Leicester, the bank that agreed to a takeover by Banco Santander SA, dropped 13.25 pence to 297.25.

Stocks in Europe extended declines after the European Commission cut its growth estimate for the euro area this year and signaled it may also lower its 2009 forecast as the U.S. and Asian economies cool.

The U.K. economy is contracting for the first time in at least a decade, the National Institute for Economic and Social Research said.

Gross domestic product dropped 0.2 percent in the June to August period and fell 0.1 percent in the three months through July, the group, whose clients include the Bank of England and the U.K. Treasury, said in an e-mailed statement today.

Old Mutual decreased 4 pence to 96.9. The company will write down $135 million in the value of preferred stock in Fannie Mae and Freddie Mac and increase reserves by $155 million for guarantees on policies in the U.S. Old Mutual will also set aside $250 million to support its operation in Bermuda, it said.

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

U.K. companies:

EasyJet Plc (EZJ LN) lost 10.25 pence, or 2.7 percent, to 365.25. Europe's second-biggest discount airline had its share recommendation downgraded by UBS AG, which said gains in the stock don't reflect challenges it faces next year.

Enterprise Inns Plc (ETI LN) lost 29 pence, or 11 percent, to 236. Britain's second-biggest pub landlord fell to its lowest price since 2003 after the Financial Times said the stock is poised to exit the FTSE 100 Index and Morgan Stanley downgraded the shares.

Kesa Electricals Plc (KESA LN) plunged 13.4 pence, or 8.7 percent, to 141. The owner of Darty electronics shops in France and the U.K. Comet chain said first-quarter sales dropped after higher living costs hurt demand for flat-screen televisions and laptop computers.

Next Plc (NXT LN) decreased 12 pence, or 1.1 percent, to 1,131. The U.K.'s second-largest clothes retailer said first-half profit fell 13 percent as higher living costs left Britons with less to spend on fashions.

RSA Insurance Group Plc (RSA LN) slipped 9.4 pence, or 5.8 percent, to 152.9. The U.K.'s second-largest non-life insurer was cut to ``underweight'' from ``overweight'' at JPMorgan Chase & Co., which said M&A is ``unlikely at current levels.''

Thorntons Plc (THT LN) gained 4 pence, or 3.6 percent, to 116. The U.K. chocolate maker founded in 1911 said full-year profit rose 15 percent on commercial sales.

Irish companies:

Ryanair Holdings Plc (RYA ID) decreased 10.1 cents, or 3.6 percent, to 2.70 euros. Europe's biggest discount airline postponed the opening of its Edinburgh base after a strike by Boeing Co. machinists delayed the delivery of planes.

To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net.