March 27 (Bloomberg) -- U.K. stocks including Wolseley Plc fell. Morgan Stanley cut its price estimate on the world's biggest distributor of plumbing equipment and Lennar Corp., the largest U.S. homebuilder, reported a drop in earnings.

British Airways Plc paced European airlines lower as oil traded near its highest this year. Barclays Plc shares retreated.

Next Plc paced rising shares amid speculation the retailer may receive a takeover approach. Diageo Plc gained after Dresdner Kleinwort recommended investors increase their holdings in the liquor maker.

The benchmark FTSE 100 slipped 5.3, or 0.1 percent, to 6296.60 in London at 12:04 p.m. The measure earlier rose as much as 0.7 percent. The FTSE All-Share Index added 3.84, or 0.1 percent, to 3270.98. Ireland's ISEQ Index lost 44.80, or 0.5 percent, to 9403.84.

Wolseley slid 3.5 percent to 1205 pence. Lennar said earnings plummeted in the first-quarter as demand waned in the worst U.S. housing slump in more than a decade. Wolseley makes more than half of its sales in North America.

Separately, Morgan Stanley cut its price estimate on Wolseley's stock by 5 percent to 1330 pence a share.

Barclays, the third-largest U.K. bank, retreated 2.2 percent to 725 pence.

Barclays, British Airways

President Robert Diamond said he is ``very confident'' about Barclay's talks to buy ABN Amro Holding NV, the biggest Dutch bank.

The U.K. bank said on March 20 it agreed on some merger terms with ABN Amro.

British Airways paced European airlines lower as oil traded near its highest this year.

Europe's third-largest airline lost 2.1 percent to 494 pence. Energy expenses account for 30 percent of airlines' total costs, according to Credit Suisse research.

Crude oil climbed 1 percent yesterday as the U.K. demanded Iran release 15 servicemen, raising concern the dispute may escalate and disrupt supply from the Middle East.

Next, the U.K.'s third-largest clothes retailer, rallied 3.6 percent to 2307 pence on speculation the company may receive a takeover bid of 2,500 pence a share.

``I am not sure where the 2500 pence price tag came from but traders are keen not to miss out on the next blue chip private equity target,'' said Martin Slaney, head of spread betting at GFT Global Markets in London.

Alistair Mackinnon-Musson, a spokesman for Next, declined to comment.

Diageo, the world's largest liquor maker, increased 1.1 percent to 1016.5 pence after Dresdner raised its recommendation for the shares to ``add'' from ``hold,'' saying earnings growth may be up to 8 percent more than forecast for 2007.

``The U.S. market remains in healthy growth and Diageo's share continues to grow,'' analysts wrote in a note to investors. ``Emerging markets remain exciting.''

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

Cairn Energy Plc (CNE LN) retreated 32 pence, or 2 percent, to 1602 pence. The U.K.-based oil explorer posted a loss of $82 million in 2006 as production declined and a writedown on its Sangu project weighed on full-year results. Revenue rose to $286.3 million from $262.6 million in 2005, missing the median estimate of $288.3 million in a Bloomberg News survey.

Imperial Energy Corp. (IEC LN) surged 75 pence, or 5.3 percent, to 1500. The company which produces oil and gas in Russia and Kazakhstan jumped to a record after reporting estimated resources on 22 prospects following an audit of assets in the Tomsk region of western Siberia.

Pearson Plc (PSON LN) fell 17 pence, or 2 percent, to 851.5 pence, snapping a four-day rally. Dresdner Kleinwort yesterday lowered its recommendation for the owner of Penguin Books and the Financial Times newspaper to ``hold'' from ``add,'' citing the ``dramatic share-price appreciation.''

``For the second time in three months, the share price has been lifted by breakup rumors,'' analysts wrote in a note to investors. ``The key question is if a bid will be forthcoming this around and at what price.''

Signet Plc (SIG LN) rallied 4.5 pence, or 3.8 percent, to 123 after Morgan Stanley raised its recommendation for the world's largest specialty jewelry retailer to ``overweight'' from ``equal-weight,'' citing the possibility of a merger with Zale Corp. of the U.S.

The brokerage also raised its share-price estimate for the stock by 29 percent to 135 pence.

``A merger with Zale would transform the Signet investment case, sending fair value to around 160 pence per share, possibly more,'' analysts wrote in a note clients.

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

Last Updated: March 27, 2007 07:52 EDT