U.K. Stocks Drop, Paced by Banks; Marks & Spencer Shares Fall

By Sarah Thompson

Sept. 23 (Bloomberg) -- U.K. stocks fell, led by banks, on concern the U.S. government's plan to buy $700 billion of bank assets will fail to bolster the economy. Royal Bank of Scotland Group Plc and Barclays Plc slid.

Marks & Spencer Group Plc dropped after Deutsche Bank AG said ``low expectations for the second quarter are justified'' and ``there is still no sign of `corrective action.''' Tate & Lyle Plc slumped as much as 17 percent, the most in a year, after the maker of the biggest-selling U.S. no-calorie sweetener said a U.S. judge disagreed with patent infringement claims brought by the company.

The benchmark FTSE 100 index fell 139.25, or 2.7 percent, to 5,097.01 at 11:53 a.m. in London. The FTSE All-Share Index slid 2.8 percent. Ireland's ISEQ Index fell 7.4 percent.

The Stoxx 600 is down 25 percent this year on concern more than $500 billion in credit-related losses and writedowns at financial firms worldwide and a slowing global economy will hurt profits. U.S. stocks dropped yesterday as oil jumped and investors speculated Treasury Secretary Henry Paulson's plan to buy toxic mortgage assets will fail to prevent a recession.

``There are worries that the Paulson plan may not be the panacea that everyone first thought it was,'' said Tony Dolphin, director of strategy and economics at Henderson Global Investors in London, which manages about $125 billion.

RBS, the U.K.'s second-biggest bank by market value, fell 7.1 percent to 200.75 pence, Barclays, the U.K's third-biggest bank, decreased 5.6 percent to 352.

Marks & Spencer retreated 4.4 percent to 227 pence after Deutsche cut its recommendation to ``hold'' from ``buy.''

``Second-quarter sales on Oct. 2 are likely to show M&S continuing to underperform in general merchandise and food,'' the analysts, including Rod Whitehead, wrote in a research note dated Sept. 22.

``Our concern is much more that we cannot see initiatives under way to get M&S back on track in the year ahead,'' the team said. ``In addition to trading down and operational errors, a new issue is emerging with rising input costs likely to preclude the gross margin increases that have been the biggest driver of profits recovery.''

Tate & Lyle tumbled 13 percent to 361.5 pence. An administrative law judge at the U.S. International Trade Commission in Washington gave an initial ruling in the case against some makers and importers of Chinese sucralose, London- based Tate said on its Web site late yesterday. Robert Gibber, general counsel for Tate, said the company intended to petition for an appeal of the decision by the full commission.

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

Helphire Plc (HHR LN) dropped 6.5 pence, or 4.7 percent, to 131.5. The U.K. supplier of rental cars for motorists involved in accidents said full-year profit rose 2.9 percent.

InterContinental Hotels Group Plc (IHG LN) dropped 33 pence, or 4.5 percent, to 706.5. The owner of the Crowne Plaza lodging brand said revenue per available room at its Americas division stagnated last month, hurt by weaker sales at the company's Holiday Inn unit.

JD Sports Fashion Plc (JD/ LN) added 26 pence, or 9.5 percent, to 301. The U.K.'s third-largest sporting-goods retailer said first-half profit rose 73 percent on sales of higher margin in-house labels.

Man Group Plc (EMG LN) decreased 47 pence, or 11 percent, to 386.5. The world's largest publicly traded hedge-fund manager was rated ``underperform'' in new coverage at Jefferies, which highlighted the ``prospect of significantly lower profits.''

Mitchells & Butlers Plc (MAB LN) decreased 30.5 pence, or 11 percent, to 242. The owner of O'Neill's pubs said sales weakened at its Harvester restaurants as British middle-income families rein in spending.

Renewable Energy Generation Ltd. (RWE LN) declined 3 pence, or 2.4 percent, to 121. The wind farm developer and owner reported a first-half net loss of 4.09 million pounds from a loss of 1.33 million pounds.

Severn Trent Plc (SVT LN) lost 11 pence, or 0.8 percent, to 1,364. The U.K.'s second-biggest water company said performance in the six months ending Sept. 30 is in line with its expectations.

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