U.K. Stocks Decline for a Second Day, Led by Barclays, BP, BHP

By Sarah Thompson

Oct. 22 (Bloomberg) -- U.K. stocks dropped for a second day after the Bank of England Governor Mervyn King said the country faces a recession and oil and metals prices fell.

Barclays Plc, the U.K.'s second-biggest bank, and BP Plc, retreated more than 4 percent. BHP Billiton Ltd., the world's largest mining company, declined after saying ``uncertainty'' will remain in China after the economy cooled.

The FTSE 100 Index slumped 157.42, or 3.7 percent, to 4,072.31 at 1:06 p.m. in London. The FTSE All-Share index retreated 3.6 percent and Ireland's ISEQ index decreased 4.1 percent.

King said Britain's worst banking crisis since World War I is likely to push the economy into a recession, requiring policy makers to act ``promptly'' to prevent inflation from slowing too much.

``I agree with him,'' said Tony Dolphin, director of strategy and economics at Henderson Global Investors in London, which manages about $125 billion. ``I think it will be on a par with the early 1990's recession, at least, and could be worse.''

The pound fell as much as 5 cents against the dollar and also declined versus the euro as the National Institute of Economic and Social Research said the economy will undergo its first full-year contraction since 1991. Policy makers voted unanimously to lower the key interest rate a half-percentage point to 4.5 percent in coordinated cuts with other central banks around the world on Oct. 8, minutes of their meeting showed today.

Barclays fell 6.4 percent to 227 pence. Royal Bank Scotland Group Plc, the U.K.'s fourth-biggest bank, lost 12 percent to 70 pence.

`Uncertainty'

BP, Europe's second-largest oil company by market value, decreased 4.6 percent to 447. Crude oil for December delivery slid as much as $3.28, or 4.5 percent, to $68.90 a barrel in electronic trading on the New York Mercantile Exchange. It was at $69.32 as of 12:07 p.m. London time.

BHP Billiton, dropped 8.2 percent to 888 pence. The company said ``uncertainty'' will persist in China after the economy grew at its slowest pace in five years.

Copper fell for a third straight day, leading declines in all industrial metals on the London Metal Exchange, as a slowdown in world economic growth reduces demand from industry and increases stockpiles.

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

U.K. companies:

Carpathian Plc (CPT LN) increased 5.25 pence, or 24 percent, to 27.25. The U.K. real estate company founded in 2005 to invest in central and eastern European property had a record gain in London trading after saying it may put itself up for sale.

GlaxoSmithKline Plc (GSK LN) advanced 34.5 pence, or 3.1 percent, to 1,162.5. The world's second-largest drugmaker said third-quarter net income fell to 1.03 billion pounds ($1.69 billion), or to 20 pence a share, from 1.31 billion pounds, or 23.5 pence a year earlier.

Excluding restructuring costs, earnings were 25.2 pence a share, beating the median 24.1 pence estimate of eight analysts surveyed by Bloomberg.

Home Retail Group Plc (HOME LN) decreased 3.5 pence, or 1.8 percent, to 197.5. The owner of Britain's Argos stores reported a first-half loss after writing down the value of its Homebase do- it-yourself chain and as Britons spent less on garden tools and home products.

Manganese Bronze Holdings Plc (MNGS LN) slid 14 pence, or 8.3 percent, to 155. The biggest maker of London's iconic black cabs fell the most in at least 19 years in U.K. trading after the global financial crisis and economic slowdown sent taxi sales plunging.

Vernalis Plc (VER LN) jumped 0.65 pence, or 24 percent, to 3.35 pence. The bio-pharmaceutical company regained rights to a set of compounds targeting inflammatory diseases from Merck KGaA that the German drugmaker had inherited through its purchase of Serono SA last year.

Woolworths Group Plc (WLW LN), whose U.K. stores sell products from appliances to candy, fell 0.31 pence, 7.1 percent, to 4.08 pence, after it said Robert McDonald will replace Stephen East as chief financial officer.

Xstrata Plc (XTA LN) slid 95.5 pence, or 8.9 percent, to 975.5. Cia. Vale do Rio Doce, the world's biggest iron-ore producer, denied speculation it was interested in renewing a bid for the world's fourth-largest copper producer.

To contact the reporter on this story: Kevin Crowley in London kcrowley1@bloomberg.netSarah Thompson in London at sthompson17@bloomberg.net.