U.K. Stocks Drop, Led by Energy Shares on Recession Concerns

By Sarah Thompson

Oct. 16 (Bloomberg) -- U.K. stocks slumped for a second day as investors speculated a global bailout of banks has failed to stave off recession. BHP Billiton Ltd., Rio Tinto Group and Royal Dutch Shell dropped as oil and metals prices decreased.

Travis Perkins Plc tumbled 38 percent after it said pretax profit will probably be at the low end of analysts' estimates and that it plans to scrap its dividend to hoard cash.

The benchmark FTSE 100 slipped 123.04, or 3 percent, to 3,956.55 at 12:35 p.m. in London. The FTSE All-Share Index lost 3.2 percent and Ireland's ISEQ Index decreased 2.1 percent.

``No-one can see the light at the end of the tunnel just yet,'' said Piers Hillier, the London-based head of European equities at WestLB Mellon Asset Management who oversees the equivalent of $8.8 billion. ``Commodities are being hit hard and now that inflationary fears are subsiding, we need to see further rate cuts.''

Europe's Stoxx 600 has lost 38 percent this year as concern the seizure in credit markets will trigger a global recession erased $25 trillion in value from stocks worldwide. Financial firms reported $637 billion in losses and writedowns from mortgage-related investments since the beginning of 2007.

BHP, the world's largest mining company, retreated 4.7 percent to 873 pence. Rio, the third-biggest, lost 6 percent to 2,216 pence.

Copper fell to the lowest since January 2006 in London and aluminum slid to a three-year low as stocks in Japan plunged the most in 21 years, fanning speculation a global recession will slash demand for industrial metals.

Shell, Europe's largest oil company, decreased 4.4 percent to 1,333 pence. BP Plc, the region's second-biggest, slid 1.5 percent to 408. Crude oil fell for a third day, taking the decline from its July record to more than 50 percent.

`Too Late'

``Rescue efforts came too late and we're staring down the barrel of a long recession, with commodities bearing the brunt,'' David Buik, a market analyst at BGC Partners in London, said. ``We will be in this situation until the end of 2009.''

Travis Perkins slumped 182.25 pence to 298.75, a record drop. The building materials distributor that owns the Wickes home-improvement chain now predicts a ``more rapid decline'' in its business than forecast earlier.

Cost-cutting will help offset the ``steeper decline'' in construction expected to befall the industry, Chief Executive Officer Geoff Cooper said in an interview. Royal Bank of Scotland analyst John Messenger said Oct. 10 Travis is faced with breaching loan agreements next year if it doesn't negotiate new terms or raise additional equity. Banks have already committed to five-year credit lines so no change to existing covenants is necessary, Cooper said.

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

U.K. companies:

Arena Leisure Plc (ARE LN) which runs more than a quarter of the U.K.'s horse races, said annual profit will miss analysts' estimates because the credit crunch has hurt spending and attendance. The shares plunged 4 pence, or 14 percent, to 25 pence.

Ashmore Group Plc (ASHM LN), a London-based money manager that focuses on emerging markets, said assets under management for the last quarter dropped 15 percent ``reflecting the turbulent nature of the markets during the period.'' The shares lost 16 pence, or 9.9 percent, to 145.

Aggreko Plc (AGK LN) jumped 31 pence, or 7.8 percent, to 431. The world's largest provider of mobile generators said annual pretax profit increased by ``at least'' 50 percent as hurricanes Gustav and Ike boosted North American demand.

Telecity Group Plc (TCY LN) rose 3 pence, or 1.6 percent, to 193. The U.K. data center operator that hosts Sony Corp.'s European PlayStation servers will withstand the financial crisis because of its broader client base, Chief Executive Officer Michael Tobin said.

TUI Travel Plc (TT/ LN) slumped 57.55 pence, or 23 percent, to 192.2. Europe's largest tourism company said majority owner TUI AG has ``no current intention'' of making an offer for the shares it doesn't own.

Smiths News Plc (NWS LN) dropped 3.25 pence, or 4.4 percent, to 70.75. The U.K. magazine and newspaper wholesaler formed from the split of W.H. Smith Plc in 2006 said full-year profit dropped 7.7 percent as publishers raised prices to compensate for increasing production costs.

Irish Companies:

Waterford Wedgwood Plc (WTFU ID) plummeted 50 percent to 0.001 euros. The Irish crystal maker controlled by billionaire Tony O'Reilly plans to eliminate 280 local jobs at its crystal division as part of a cost-reduction plan.

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