U.K. Stocks Decline, Led by Retailers; Marks & Spencer Retreats

By Adam Haigh

Dec. 10 (Bloomberg) -- U.K. stocks fell, led by retailers, after Morgan Stanley said sales during Christmas could be the “worst in many years’ and a government-funded institute warned the economy may shrink at the fastest pace since 1990 this quarter.

Marks & Spencer Group Plc and Kesa Electricals Plc slumped more than 4 percent after Morgan Stanley said the two retailers are “most likely to disappoint” this Christmas as earnings come under pressure from lower sales and increased discounting.

Rio Tinto Group limited losses on the FTSE 100 after the world’s third-largest mining company said it will eliminate 14,000 jobs, cut capital spending by more than half and sell “significant assets” as demand for metals sinks in the global recession.

The benchmark FTSE 100 Index slid 9.65, or 0.2 percent, to 4,371.61 at 12:47 p.m. in London, snapping two days of gains. The gauge is down 32 percent this year as losses at global financial firms approached $1 trillion and the economic slowdown erodes profit. The FTSE All-Share Index was little changed today and Ireland’s ISEQ Index slipped 1.6 percent.

“We will stay with our bearish and cautious stance,” on equities, said Leo Schrutt, a senior managing director at Stanford Group (Suisse) AG, which is part of the Stanford Financial Group of companies that manage about $50 billion in assets worldwide.” “Markets and market participants are a little bit fed up and tired of the bad news. 2009 will also be a very bad year,” he told Bloomberg Television.

Gross domestic product fell 1 percent in the three months through November and will probably plunge more than that in the last three months of the year, the National Institute for Economic and Social Research said.

Marks & Spencer Retreats

Marks & Spencer, the U.K.’s largest clothing retailer, retreated 4.8 percent to 231.75 pence. Kesa the owner of France’s Darty electronics stores and Britain’s Comet chain, dropped 8.3 percent to 96.25 pence.

“Christmas is shaping up to be the worst in many years,” Morgan Stanley analysts led by Fred Bjelland wrote in a note today. “Worryingly, we believe that many retailers have entered the crucial Christmas selling period with too much stock.”

Rio Tinto rallied 17 percent to 1,467 pence as it said it was cutting 14,000 jobs and plans to reduce spending by $5 billion.

William Morrison Supermarkets Plc, the smallest of the four main U.K. food retailers, gained 4.8 percent to 278.25 as JPMorgan Chase & Co. raised the shares to “overweight,” citing an improvement in like-for-like sales growth.

Carillion Gains

Carillion Plc added 12 percent to 245 pence. Britain’s second-biggest builder forecast full-year earnings growth of 15 percent, ahead of an earlier prediction, on growth in the Middle East.

Fresnillo Plc, Lonmin Plc and Petrofac Plc may be removed from the FTSE 100 this month after FTSE Group announces its quarterly changes to the index today, according to John Meyer, head of resources analysis at Fairfax IS Plc in London.

Randgold Resources Ltd. may be added to the gauge, he wrote in a note to clients today.

FTSE Group will announce the changes after the close of the U.K. market today and was unable to confirm companies leaving or being added to the measure before this.

To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net