U.K. Stocks Decline on Recession Concern; Shell, HSBC Slide

By Sarah Thompson

Nov. 19 (Bloomberg) -- U.K. stocks declined as investors speculated the global recession is worsening and oil and metals prices slid. Royal Dutch Shell Plc, Europe's largest oil company, and Rio Tinto Group dropped.

HSBC Holdings Plc led financial companies lower after Europe's biggest bank was downgraded to ``sell'' at WestLB AG, which cited further deterioration in the global economic outlook and a lower-than-average Tier 1 capital ratio.

The benchmark FTSE 100 Index slid 87.93, or 2.1 percent, to 4,120.62 at 12:28 p.m. in London. The FTSE All-Share Index decreased 2.1 percent and Ireland's ISEQ Index added 0.2 percent.

The FTSE 100 index has dropped 36 percent this year as asset writedowns and credit losses at financial companies topped $965 billion worldwide and sparked the worst banking crisis since the Great Depression.

The Monetary Policy Committee in the U.K., led by Governor Mervyn King, voted 9-0 to lower the rate to 3 percent, the central bank said in minutes of the Nov. 6 decision released today in London. Policy makers said that their forecasts implied the need for a reduction of maybe more than 2 percentage points.

``BOE minutes spells out what everyone already knows, the economy is struggling,' said Nick Brind, a London-based money manager at New Star Asset Management, which oversees about $25 billion. ``Investor sentiment is likely to remain in the doldrums.''

Shell lost 2.5 percent to 1,650 pence. Crude oil fell for a fourth day, dropping to its lowest in 22 months, on expectations U.S. inventories gained last week as fuel demand in the world's largest user declined.

Rio Retreats

Rio Tinto, the world's third-largest mining company, decreased 3.5 percent to 2,382 pence. Copper for delivery in three months on the London Metal Exchange fell as much as 1.7 percent to $3,688 a metric ton, and traded at $3,725 at 3:23 p.m. Singapore time.

HSBC, Europe's biggest bank by market value, slid 4.2 percent to 665 pence. WestLB said the lender's Tier 1 capital ratio, a measure of financial strength, is now 8.9 percent, which is less than the 10 percent average for the European banking industry, according to a note to clients dated yesterday.

The broker also slashed its price estimate on the shares 24 percent to 615 pence. Separately, UBS AG said the earnings prospects for European banks next year are ``dreadful.''

AstraZeneca Plc lost 4.7 percent to 2,673 pence. The maker of the Crestor cholesterol-lowering medicine, said the U.S. Food and Drug Administration granted approval for a generic version of the Pulmicort Respules asthma drug, rejecting some of the U.K. drugmaker's arguments put in a citizen's petition.

U.K. companies:

British Land Co. Plc (BLND LN) slid 10.5 pence, or 1.9 percent, to 533 pence. The U.K.'s second-largest real estate investment trust posted a second quarter loss after it was forced to write down the value of its shops and offices by 683 million pounds ($1.02 billion).

Business Post Group Plc (BPG LN) dropped 4.25 pence, or 1.5 percent, to 273. The postal company that handles a tenth of the U.K. mail market posted a 39 percent decline in first-half net income as it paid more tax.

Experian Plc (EXPN LN) climbed 36 pence, or 12 percent, to 342.5. The world's largest credit-checking company said first- half profit jumped 15 percent as it cut costs to offset declining demand for credit services in the U.S. and U.K.

Marks & Spencer Group Plc (MKS LN) declined 8.25 pence, or 3.9 percent, to 203. The U.K.'s largest clothing retailer fell for an eighth straight day as reports that the company plans a one-day sale added to concern over business in the lead-up to Christmas.

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