U.K. Stocks Drop, Economic Woes Overshadow Global Rate Cuts

By Sarah Thompson

Oct. 8 (Bloomberg) -- U.K. stocks slid as emergency interest rate cuts by global central banks failed to allay fears of a world-wide recession. HSBC Holdings Plc, Europe's biggest bank, dropped 3.7 percent.

BP Plc and BHP Billiton Ltd. fell as oil and metals prices declined.

The benchmark FTSE 100 index lost 198.83, or 4.3 percent, to 4,406.39 at 2:20 p.m. in London. The U.K. index has swung between losses and gains at least a dozen times. The FTSE All-Share Index retreated 3.9 percent. Ireland's ISEQ Index fell 5.9 percent.

The Bank of England, Federal Reserve, European Central Bank, Bank of Canada and Sweden's Riksbank each cut their benchmark rates by half a percentage point.

The Fed's Open Market Committee, which voted unanimously for the move, said in its statement that ``incoming economic data suggest that the pace of economic activity has slowed markedly in recent months. Moreover, the intensification of financial market turmoil is likely to exert additional restraint on spending.''

``The bounce straight after this announcement was short- lived,'' said Jesper Kruger, a money manager in Copenhagen at ATP, which has about $64 billion. ``The underlying economic picture remains very worrying. There's a long, painful road to recovery ahead of us.''

HSBC slid 3.7 percent to 868 pence. Efforts by governments around the world to restore confidence in the banking system have failed to unlock credit markets and stem share declines that sent the MSCI World to the lowest level since August 2004 earlier today. The cost of borrowing in dollars overnight in London soared for a third day and European money-market rates climbed to records before the central banks' announcement.

Oil Falls

BP, Europe's second-biggest oil company, dropped 3.8 percent to 430.5. BHP, the world's largest mining company, fell 9.4 percent to 985.

Crude oil for November delivery traded at $88.24 a barrel, $1.82 lower, on the New York Mercantile Exchange at 8:57 a.m. in New York. Before the rates cuts, crude fell as much as 4.5 percent, to $86.05, the lowest since Dec. 6, 2007.

Copper for delivery in three months slumped as much as 7.2 percent to $5,227 a metric ton at 2:16 p.m. in London. Platinum, nickel, lead, zinc and aluminum prices also fell.

Shares of J Sainsbury Plc, the third-largest U.K. food retailer, were put on sale for 250 pence each by Kaupthing Bank Hf, three people involved in the transaction said.

Sainsbury fell as much as 18 percent in London trading, wiping almost 1 billion pounds ($1.7 billion) off its market value. The stake consists of about 168 million shares, according to the people, who didn't want to be identified because the sale has yet to close. The stock traded down 6.2 percent at 292.25 pence at 2:24 p.m.

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