U.K. Stocks Retreat, Led by Barclays; Shell Drops on Oil Price

By Sarah Jones

June 2 (Bloomberg) -- U.K. stocks fell, with the FTSE 100 Index dropping from the highest level in almost five months, as Barclays Plc’s Abu Dhabi investors sell 4.12 billion pounds ($6.8 billion) of the lender’s shares.

Barclays, the U.K.’s third-largest bank, sank 14 percent. HSBC Holdings Plc dropped 2.2 percent as Saad Group, the company owned by Maan al-Sanea, the Saudi billionaire who holds a stake in Europe’s biggest bank, said it is restructuring debts because of tighter credit markets. Tullow Oil Plc and Royal Dutch Shell Plc led energy companies lower after crude oil fell from the highest in eight months.

The FTSE 100 lost 51.39, or 1.1 percent, to 4,454.80 at 10:02 a.m. in London, erasing some of yesterday’s 2 percent rally. The FTSE All-Share Index declined 1 percent. Ireland’s ISEQ Index gained 3.6 percent after the market was closed yesterday for a public holiday.

“There is really only one story in London this morning and that is the divestment of Barclays’ shares by Abu Dubai,” said Manus Cranny, senior market analyst at MF Global Spreads in London. “Today’s market action is a pause for thought. We have had a fantastic run and I think fundamentals are struggling to validate that run.”

U.K. stocks rallied yesterday after data showed Chinese manufacturing expanded for a third month, sending a gauge of mining shares to an eight-month high. The FTSE 100 has rebounded 27 percent from this year’s low on March 3 amid growing optimism the worst of the recession may be over.

U.K. mortgage approvals rose more than economists forecast in April to the highest level in a year, according to data released today from the Bank of England, underpinning demand for homes as the property-market slump shows signs of easing.

Stake

Barclays lost 14 percent to 272.75 pence. PCP Gulf Invest 1 Ltd., owned by the Abu Dhabi-based International Petroleum Investment Co., is sheding a stake in the lender that it bought last year.

Abu Dhabi hired Credit Suisse Group AG to sell mandatory convertible notes, which amount to about 1.3 billion shares. Credit Suisse is offering the shares for 260 to 270 pence each, according to a person familiar with the sale.

HSBC fell 2.2 percent to 540 pence. Saad Group said it is planning an “orderly restructuring” of its debt after it was affected by a “short-term liquidity squeeze.”

Saudi Arabia’s central bank ordered the country’s banks to freeze the accounts of Maan al-Sanea, people familiar with the instructions said on May 31.

Oil Retreats

Tullow Oil, the U.K. explorer in Africa, fell 1.9 percent to 1,025 pence. Crude oil retreated from a seven-month high in New York on signs OPEC’s output is climbing and as traders who bet on rising prices sold futures to lock in gains.

Royal Dutch Shell, Europe’s biggest oil company, declined 1.3 percent to 1,666 pence. BG Group Plc, the U.K.’s third- largest natural-gas producer, retreated 1.6 percent to 1,138 pence.

A measure of energy companies yesterday climbed to the highest since January as crude oil jumped 3.6 percent after the U.S. and China reported increases in manufacturing activity.

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

Kingfisher Plc (KGF LN) increased 13.2 pence, or 7.2 percent, to 197. Europe’s largest home-improvement retailer said first-quarter profit rose more than expected after warmer weather and store refurbishments spurred sales at its U.K. B&Q chain.

Earnings before interest and tax climbed 39 percent to 128 million pounds, beating the 94 million-pound consensus estimate compiled by Kingfisher.

Ryanair Holdings Plc (RYA ID) dropped 23 cents, or 6.3 percent, to 3.40. Europe’s largest discount carrier reported its first annual loss as fuel bill soared and the airline further wrote down the value of a stake in Irish competitor Aer Lingus Plc.

The net loss was 169 million euros ($239 million), missing the 70 million-euro median estimate by seven analysts surveyed by Bloomberg.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net.