U.K. Stocks Decline; Hammerson, Land Securities Lead Retreat

By Alexis Xydias

Sept. 29 (Bloomberg) -- U.K. stocks fell after the benchmark FTSE 100 Index gained the most in three weeks yesterday, as Credit Suisse Group AG advised paring holdings in property companies because of Britons’ debt levels.

Hammerson Plc and Land Securities Group Plc fell more than 2 percent. Compass Group Plc and Daily Mail and General Trust Plc gained at least 3 percent after releasing updates on their businesses.

The benchmark FTSE 100 Index fell 22.32, or 0.4 percent, to 5,143.38 as of 10:18 a.m. in London. The index gained the most since Sept. 7 yesterday. The FTSE All-Share Index dropped 0.4 percent and Ireland’s ISEQ Index added 0.5 percent.

The FTSE 100 has rallied 47 percent since March 3 as earnings beat estimates and economic releases showed the worst of a global recession may be past. Gross domestic product in the U.K. shrank an annual 5.5 percent in the second quarter, the government said today.

“People generally are starting to get a bit more cautious on concern the rally may have run its course,” said Ian Murrell, director at Wills and Co. Stockbrokers Ltd. in London. “If you take the short-term view, the market could correct a bit of these gains we’ve had.”

Hammerson shares lost 2 percent to 401.1 pence. Land Securities decreased 2.6 percent to 639.5 pence. Credit Suisse cut its recommendation on U.K. real-estate shares to “market weight” from “overweight,” citing elevated household debt and home prices.

‘Economic Momentum’

“U.K. economic momentum is no longer the best,” wrote a team of strategists led by Andrew Garthwaite in a report today. “Household leverage and house price valuations are more extended in the U.K. than the U.S. and the structural government deficit is the worst” among Organization for Economic Cooperation and Development countries. “We therefore reduce exposure to domestic U.K. sectors.”

Compass Group added 3.4 percent to 371.8 pence. The world’s largest catering company said it’s performing well and that it’s “optimistic” about the business recovery. Compass said the pace of new contracts is “strong.”

DMGT rose 3.7 percent to 456.7 pence. The publisher of Britain’s Daily Mail newspaper said it’s “confident” it will at least meet market expectations for full-year adjusted profit after reporting sales in the 11 months to Aug. 31 fell 9 percent.

The following stocks also rose or fell in U.K. and Irish markets. Stock symbols are in parentheses:

Dairy Crest Group Plc (DCG LN) gained 7.2 pence, or 1.9 percent, to 384 pence. The U.K.’s biggest milk and cheese producer said sales of milk to its major retail customers advanced 10 percent in the first half.

Enterprise Inns Plc (ETI LN) rose 4.8 pence, or 3.6 percent, to 139.7. The pub manager said it’s had “stabilization in beer volumes, reports of improving food sales and an abatement of cost pressures on licensees.”

Legal & General Group Plc (LGEN LN) rose 3.55 pence, or 4.5 percent, to 82.55 pence. The second-biggest U.K. insurer by assets gained for a third day after the Sunday Telegraph reported Sept. 27, citing no-one, that the company has prepared documents to ward off a potential takeover by Clive Cowdery’s Resolution Ltd.

Royal Bank of Scotland Group Plc (RBS LN), the lender majority-owned by the state, added 1.25 pence, or 2.4 percent, to 52.85. Speaking at a conference in London, Chief Executive Officer Stephen Hester said the bank’s net interest margins are going in the “direction expected.”

To contact the reporters on this story: Alexis Xydias in London at axydias@bloomberg.net.