U.K. Stocks Fall, Head for Third Weekly Loss; LSE Declines

By Alexis Xydias

Oct. 3 (Bloomberg) -- U.K. stocks fell, headed for their third weekly loss. London Stock Exchange Group Plc retreated after Credit Suisse Group analysts advised clients to pare holdings in the bourse as rivals take market share.

Blacks Leisure Group Plc, the U.K.'s largest retailer of outdoor gear, and John Menzies Plc, a handler of cargo at airports including London Heathrow, dropped after saying their earnings may disappoint. Regal Petroleum Plc surged after the Daily Telegraph reported Royal Dutch Shell Plc proposed a $1.2 billion takeover of the oil-and-gas company.

The FTSE 100 Index retreated 14.50, or 0.3 percent, to 4,855.84 at 1:11 p.m. in London, heading for a 4.6 percent loss this week. The FTSE All-Share Index slipped 0.4 percent. Ireland's ISEQ Overall Index fell 0.3 percent.

The FTSE 100 has lost about a quarter of its value this year as the cost of borrowing money for banks surged, at least two lenders had to be nationalized, and companies faced slowing consumer demand. The British benchmark slumped 13 percent in the third quarter, a fifth consecutive quarterly decline and its poorest showing since the same period in 2002.

We do not ``expect equities to move sharply in the fourth quarter,'' wrote Darren Winder and Robert Griffiths, strategists at Cazenove in London, in a note today. ``However, persisting liquidity pressures in the financial sector coupled with the possibility of increased levels of capital raising will probably continue to hinder equity market performance.''

LSE, Black Leisure

LSE declined 2.7 percent to 834.5 pence. The stock was cut to ``underperform'' from ``neutral'' by Credit Suisse analysts, who said Europe's oldest independent exchange faces ``mixed volumes and competitive threats.''

Blacks Leisure tumbled 13 percent to 78.25 pence. The retailer said its first-half loss will widen after ``difficult'' trading in August.

John Menzies sank 17 percent to 223 pence, leading declines in the All-Share, after saying its aviation unit will probably fail to meet analysts' profit estimates for the year amid slowing demand for air freight.

Regal Petroleum jumped 42 percent to 117.5 pence. Shell, which faced rejection when it tried to reach a deal with Regal last year, has written to the company's chairman in the last few days with a possible bid proposal of 300 pence a share, the newspaper said, without saying where it got the information.

Regal denied the report. Shell, Europe's largest oil company, slipped 1.2 percent to 1,564 pence.

Old Mutual Plc rose 3.3 percent to 75 pence, rebounding form yesterday's 9.6 percent decline. The insurer that replaced its chief executive officer last month said its Skandia unit settled an arbitration proceeding with an insurance subsidiary.

HBOS, Lloyds

HBOS Plc and Lloyds TSB Group Plc rallied as economists changed forecasts, predicting the Bank of England will cut its key rate by the most since 2001 next week.

HBOS, the mortgage lender that agreed to be bought by Lloyds TSB, increased 14 percent to 193.5 pence. Lloyds TSB rallied 11 percent to 291 pence.

Royal Bank of Scotland Group Plc jumped 11 percent to 194.5 pence.

Economists at Citigroup Inc., BNP Paribas SA, JPMorgan Chase & CO. have changed their forecasts to predict a half-point reduction from the current 5 percent on Oct. 9.

The following stocks also rose or fell in U.K. and Irish markets. Company symbols are in parentheses.

U.K. companies:

DTZ Holdings Plc (DTZ LN) fell 12.75 pence, or 10 percent, to 114.25. The U.K. real estate broker has asked JPMorgan Cazenove Ltd. to work on an equity fundraising that may involve either a placing or a rights offering, the Daily Telegraph reported, adding that the idea is still in the very early stages of planning.

Woolworths Group Plc (WLW LN) fell 0.25 pence, or 6 percent, to 3.95. Woolworths' unit Bertrams and its parent company EUK are in discussions with some distributors and publishers over reduced credit terms, the Bookseller said on its Web site, citing unidentified publishers.

To contact the reporters on this story: Alexis Xydias in London at axydias@bloomberg.net.