May 31 (Bloomberg) -- The U.K.'s FTSE 100 Index fell, as losses in shares of Unilever and Rentokil Initial Plc outweighed gains in mining companies such as Xstrata Plc. The index still closed out its best month since October 2003.

The benchmark FTSE 100 fell 22.3, or 0.5 percent, to 4964, after earlier rising as much as 0.3 percent. The FTSE All-Share Index lost 0.4 percent, even as gainers outnumbered decliners 298 to 228. The U.K. market was closed yesterday for a holiday, when Europe's Dow Jones Stoxx 50 Index climbed 0.4 percent.

The FTSE 100 advanced 3.4 percent in May, the biggest monthly gain since recording a 4.8 percent gain 19 months ago.

Unilever, the world's biggest maker of food and soap, declined 2.4 percent to 536.5 pence as UBS AG analysts cut their recommendation on the shares to ``reduce'' from ``neutral.''

The stock has ``been a strong performer,'' wrote Alan Erskine, a London-based analyst at UBS, in a note to investors. ``The shares are now over-valued and we are recommending investors to take this opportunity to reduce exposure.''

Through yesterday, Unilever shares gained 13 percent from their 2005 low on Jan. 24 and 11 percent in May.

Rentokil, the world's largest pest-control company, lost 4.1 percent to 147.75 pence, its biggest drop since December. The company may bid for PHS Group Plc, Britain's second-largest washroom-services company, The Mail on Sunday newspaper said May 29, without saying how it got the information.

Rentokil's Corporate Affairs Director Charles Grimaldi declined to comment. PHS added 2.1 percent to 97.5 pence.

Mining Stocks

Mining stocks advanced, led by copper producers Xstrata and Antofagasta Plc, on optimism sustained demand for metals and a stronger dollar will help earnings in the industry.

``There is a general recovery in the sentiment relating to demand strength,'' said John Meyer, a strategist at Numis Securities in London. Meyer, who recommends investors buy shares in Xstrata, Antofagasta and Aquarius Platinum Ltd., added that ``the dollar gains are going to create higher sterling profits.''

Xstrata, the world's largest exporter of coal used in power plants, added 1 percent to 986 pence. Antofagasta, an operator of copper mines in Chile, increased 1.8 percent to 1,156 pence.

Copper for delivery in three months on the London Metal Exchange rose 2.6 percent to $3,080 a metric ton last week, the first weekly gain in five. The contracts may increase this week after global stockpiles fell to the lowest in almost 15 years, according to a survey of 18 traders, analysts and investors surveyed by Bloomberg News on May 26 and 27.

``The low inventory levels of copper are evidence of the strong demand,'' said Numis' Meyer. ``Other metals tend to follow copper.''

Lonmin Upgraded

The British pound fell as much as 0.7 percent against the dollar, before paring the fall to $1.8233 at the time stock markets closed. The pound has decreased 4.4 percent against the U.S. currency this month.

Lonmin Plc, the world's third-biggest platinum producer, added 2.8 percent to 1,026 pence. The stock had its recommendation raised to ``buy'' from ``neutral'' by Paul Galloway, an analyst at UBS, who said the shares may reach 1,175 pence apiece in 12 months.

Imperial Tobacco Group Plc rose 2.6 percent to 1,489 pence. Europe's second-biggest cigarette maker escaped a damages award in a case brought by a widow whose husband died from lung cancer. Margaret McTear had sued for 500,000 pounds ($911,000), claiming that her late husband Arthur became addicted to smoking before health warnings appeared on cigarette packets.

Gallaher Group Plc, the U.K. maker of Benson & Hedges and Silk Cut cigarettes, added 2 percent to 848 pence.

The following stocks also made gains or losses in London. Stock symbols are in parentheses after the companies' names:

Domestic & General Group Plc (DGG LN) added 9 pence, or 1.2 percent, to 740. The U.K. insurer of home appliances said full- year operating profit rose 35 percent. The company raised an annual dividend by 15 percent.

Egg Plc (EGG LN) jumped 8.5 pence, or 8.3 percent, to 110.5. The U.K.'s largest Internet bank rose on speculation that parent Prudential Plc may sell its stake in the company, according to analysts including Mark Thomas at Keefe, Bruyette & Woods Ltd. in London.

``It's speculation, there's nothing more to it than that,'' said Egg Spokesman James Thorpe. Shares in Prudential, the U.K.'s second-biggest insurer, lost 4 pence, or 0.8 percent to 488.5.

ITV Plc (ITV LN) lost 1 pence, or 0.9 percent, to 114.5. Britain's largest commercial broadcaster has angered U.K. media regulator Ofcom by trying to increase analyst expectations that it hopes to get a cut in a 200 million-pound license fee, the Financial Times reported on May 28, without saying where it got the information.

International Power Plc (IPR LN) added 1.5 pence, or 0.8 percent, to 193.5. The owner of electricity stations in 17 countries and Japan's Mitsui & Co. agreed to buy a U.K. plant from Calpine Corp. for 490 million pounds to capitalize on rising power prices.

Jarvis Plc (JRVS LN) increased 0.5 pence, or 6.5 percent, to 8.25. The U.K. engineering company said it reached a refinancing agreement with Deutsche Bank AG, including a debt-for-equity swap, needed to meet immediate requirements and avoid a shortfall in funds.

Peacock Group Plc (PEA LN) increased 8.75 pence, or 3.8 percent, to 238. The operator of 829 discount clothing and perfume stores said it plans to step up the expansion of its Fragrance Shop unit, whose main competitor is being bought. Peacock said fiscal full-year sales rose 12 percent.

Severn Trent Plc (SVT LN) declined 11.5 pence, or 1.1 percent, to 1,011.5. Analysts at Merrill Lynch & Co. cut their recommendation on shares of the country's second-largest publicly traded water company to ``neutral'' from ``buy.'' The brokerage said the stock has already recovered from a ``valuation anomaly'' following a 12 percent gain since the end of February.

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

Last Updated: May 31, 2005 12:48 EDT