By Sarah Thompson
Oct. 7 (Bloomberg) -- U.K. stocks advanced, rebounding from the biggest slump in more than twenty years yesterday, led by BP Plc and Royal Dutch Shell Plc as the price of crude oil rallied.
The benchmark FTSE 100 index gained 40.39, or 0.9 percent, to 4,629.58 at 11:59 a.m. in London. The index plummeted the most since Oct. 20, 1987 yesterday, led by banks and mining companies on concern the credit crisis is deepening and as metals plunged. The FTSE All-Share Index rose 0.6 percent. Ireland's ISEQ Index tumbled 3.6 percent.
BP, Europe's second-biggest oil company, climbed 2.2 percent to 439 pence and Shell, the largest, added 2.5 percent to 1,540.
Crude oil rose for the first time in five days as an interest-rate cut in Australia triggered speculation other central banks will ease policy to shore up economic growth.
Diageo Plc, the world's largest liquor maker, jumped 8.3 percent 906 pence. The shares have fallen 16 percent this year.
Financial companies declined on concern banks will need funding as credit markets freeze and after Royal Bank of Scotland Group Plc had its credit rating cut.
RBS, Britain's second-biggest lender, fell to the lowest since 1995, down 19 percent to 120.50 pence on speculation it will be the next U.K. bank to need government assistance.
Separately, Standard & Poor's cut the its credit rating for the first time in 10 years, and RBS estimates it will write down 5.9 billion pounds of assets this year, a third of which are tied to last year's purchase of ABN Amro Holding NV.
``There is a loss of confidence by investors,'' said Mamoun Tazi, a London-based analyst at MF Global Securities, who has a ``buy'' rating on RBS. ``The market is implying that RBS will be the next to go, but I believe the government won't let them. So the risk of partial nationalization is real for RBS.''
Banks Meeting
Chancellor of the Exchequer Alistair Darling and Bank of England Governor Mervyn King met with banking chief executive officers including RBS's Fred Goodwin and Barclays's John Varley late yesterday to discuss investment, said two people with knowledge of the situation said.
Lloyds TSB Group Plc, the bank that agreed to buy HBOS Plc for almost $17.8 billion, lost 11 percent to 230.75 pence.
``Credit ratings downgrades are taking a very deep toll on the markets,'' said Sarah Spikes, a London-based analyst at Arden Partners. ``Even before that, concerns about capital were starting to seem endless.''
The following stocks also rose or fell in the U.K. market. Stock symbols are in parentheses.
U.K. companies:
Carluccio's Plc (CARL LN) jumped 5 pence, or 6.4 percent, to 83. The U.K. owner of a chain of Italian restaurants said sales rose 21 percent in the 53 weeks ended Sept. 28.
Michael Page International Plc (MPI LN) dropped 16 pence, or 6.8 percent, to 218.25. The U.K.'s second-largest recruitment company said third-quarter profit in the U.K. declined as clients and candidates became more cautious and the weakness in finance spread to other industries.
Mouchel Group Plc (MCHL LN) advanced 12 pence, or 4.2 percent, to 301. The U.K. company that maintains the M25 highway around London said sales gained 46 percent to 656.7 million pounds.
Shire Ltd (SHP LN) added 32 pence, or 3.8 percent, to 882.5. The U.K.'s third-largest drugmaker was upgraded to ``overweight'' from ``neutral'' at JPMorgan Chase & Co., which cited encouraging Vyvanse share gains and a valuation close to 18-month lows in dollar terms.
Tate & Lyle Plc (TATE LN) slid 12.25 pence, or 3 percent, to 395.75. The maker of the sucralose sweetener Splenda was cut to ``sell'' from ``neutral'' at Goldman Sachs Group Inc., which said the ``erosion of sucralose profits is not priced in.''
To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net.
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