July 31 (Bloomberg) -- The U.K.’s FTSE 100 Index dropped from the highest level in almost seven months, led by a sell-off in energy companies as European rivals reported lower profit.

Royal Dutch Shell Plc and BP Plc both lost more than 1.5 percent after Total SA and Eni SpA reported a drop in second- quarter earnings. Shares of British Airways Plc limited declines, rallying 6 percent as Europe’s third-largest airline said passenger numbers and seat occupancy were showing signs of a recovery.

The benchmark FTSE 100 fell 23.25, or 0.5 percent, to 4,608.36 in London after swinging between gains and losses more than 10 times. The gauge has still gained 0.7 percent this week. The FTSE All-Share Index lost 0.3 percent today, as did Ireland’s ISEQ Index.

The benchmark for U.K. equities has surged 12 percent since July 10 after companies from Goldman Sachs Group Inc. to Roche Holding AG reported earnings that exceeded estimates. Next week, U.K banks including Barclays Plc, HSBC Holdings Group Plc and Lloyds Banking Group Plc are scheduled to post results.

The market is “lacking direction after a tremendous three weeks of gains,” said London-based Angus Campbell, head of sales at Capital Spreads. “The momentum had to come to an end at some point and there’s a feeling of apprehension ahead of the U.K. banks who release earnings next week.”

Shell, Europe’s largest oil company, fell 1.8 percent to 1,572 pence after France’s Total and Italy’s Eni both today reported earnings that fell by more than 50 percent in the second-quarter.

British Airways

Rival BP fell 1.8 percent to 497.2 pence, while BG Group declined 4.5 percent to 999 pence. Cairn Energy Plc slipped 1.8 percent to 2,396 pence.

British Airways, which today posted a 106 million-pound net loss in the three-months through June, rallied 6 percent to 142.4 pence, the best performer on the FTSE 100 today.

Chief Executive Officer Willie Walsh said that while yields or ticket prices may fall further, volumes and occupancy at the carrier were likely to improve in the next few months. Quarterly sales fell 12 percent to 1.98 billion pounds. That compares with Paris-based rival Air France-KLM Group which reported a 19 percent drop in revenue.

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

Logica Plc (LOG LN) rallied 7.75 pence, or 8.3 percent, to 101.25 pence, rising for a fourth day. Bank of America Corp. raised its recommendation on the Anglo-Dutch computer-services provider to “buy,” while Morgan Stanley upgraded the shares to “overweight.”

Man Group Plc (EMG LN) dropped 10.5 pence, or 3.7 percent, to 276.75 after UBS AG downgraded the largest traded hedge fund manager to “sell” from “neutral.”

Rank Group Plc (RNK LN) rallied 8 pence, or 11 percent, to 77.75 after the U.K.’s second-largest casino owner reported a profit of 19.5 million pounds in the six months ended June 30. That compares with a loss of 50.8 million pounds in the same period a year earlier.

Rentokil Initial Plc (RTO LN) increased 6.5 pence, or 7.2 percent, to 97 after the world’s biggest pest-control company said its City Link parcel-delivery unit will have a smaller- than-expected loss this year of 12 million pounds.

United Business Media Plc (UBM LN) surged 53 pence, or 14 percent, to 424.25 after the publisher of Information Week and owner of PR Newswire increased its dividend by 7.1 percent to 6 pence per share, more than analysts expected.

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

Last Updated: July 31, 2009 12:17 EDT