U.K. Stocks Drop on Recession Concern; Shell, Rio Tinto Decline

By Sarah Thompson

Nov. 20 (Bloomberg) -- U.K. stocks declined for a second day, led by energy producers, on speculation the global economic slowdown will damp demand for commodities and curb profits.

Royal Dutch Shell Plc, Europe's largest oil company, and Rio Tinto Group led the retreat.

The benchmark FTSE 100 Index lost 64.42, or 1.6 percent, to 3,941.26 at 12:54 p.m. in London, extending a 4.8 percent drop yesterday. The FTSE All-Share Index decreased 1.5 percent and Ireland's ISEQ Index declined 1.8 percent.

U.S. stocks sank and benchmark indexes slid to their lowest levels since 2003 yesterday. The S&P 500 extended its 2008 retreat to 45 percent, poised for its worst year since 1931. More than $31 trillion has been erased from the value of global equities this year as the financial-market turmoil pushes countries from Europe to the U.S. and Japan into recession.

``U.K. stocks are taking their cue from the late sell-off in the U.S. It seems hopes of a gradual recovery following the action by authorities to stem the collapse of the financial system have been dashed,'' said Tim Hughes, head of sales trading at IG Index in London. ``There is a deepening perception that the recession will be aggressive and long-lasting.''

Shell lost 2.3 percent to 1,558 pence. BP Plc, Europe's second-largest oil company by market value, dropped 0.8 percent to 484 pence. Crude oil fell for a fifth day, approaching $50 a barrel, as the contracting world economy increases concerns that demand for fuels will slow.

Rio Tinto, the world's third-largest mining company, dropped 4.7 percent to 2,150 pence. BHP Billiton Ltd., the biggest, slid 4.3 percent to 788.5 pence.

Copper fell for a third day this week in Shanghai on concern supply may outpace demand as a global economic slowdown damps demand for raw materials.

Vedanta Resources Inc.'s Madras Aluminium Co. unit said it slashed its production ``temporarily'' by 60 percent because of falling aluminum prices and high raw material costs.

Production of Alumina remained unchanged, the Tamil Nadu- based company said today in a statement to the Bombay Stock Exchange, without giving more details. Vedanta, the largest copper producer in India, plunged 8.2 percent to 402 pence.

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

British Land Co. (BLND LN) fell 15 pence, or 3 percent, to 491. London's largest office landlord cut the value of its stake in Canary Wharf by 40 percent as the credit crisis ensnared tenants there including Lehman Brothers Holdings Inc.

Halfords Group Plc (HFD LN) added 28 pence, or 13 percent, to 251.25. The U.K.'s largest car-part and bicycle retailer reported a 4.7 percent gain in first-half profit after keeping costs in check and selling more higher-margin auto-maintenance products.

IG Group Plc (IGG LN) slumped 38 pence, or 17 percent, to 190.25, the sharpest drop since at least 2005. The owner of the IG Index financial-market betting brand, said first-half bad-debt costs will be almost quadruple the total for all of last year because of customers' wrong-way bets on Royal Bank of Scotland Group Plc stock.

Mothercare Plc (MTC LN), Britain's largest specialist retailer of baby and toddler products, added 11.5 pence, or 4.3 percent, to 280. The retailer said first-half profit more than doubled on expansion outside the U.K. and a one-time gain, and raised its dividend by 24 percent.

Rolls-Royce Group Plc (RR/ LN) fell 3 pence, or 1.1 percent, to 264.75. The world's second-largest maker of aircraft engines said it will cut as many as 2,000 jobs worldwide next year as economies slow and programs at Boeing Co. and Airbus SAS suffer delays.

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