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U.K.'s FTSE 100 Index Falls, Extending Weekly Drop; Barclays Shares Tumble

U.K. stocks fell, driving the FTSE 100 Index to its biggest weekly retreat since October, after Barclays Plc reported a larger-than-forecast drop in investment banking revenue and mining shares declined.

Barclays, Britain’s third-largest bank by assets, tumbled 6.4 percent. Rio Tinto Group Plc and Xstrata Plc lost more than 4 percent on concern that a possible increase in Australian mining taxes may hurt profits. BP Plc fell to a two-month low as analysts warned the Gulf of Mexico oil spill may cost the company and its partners as much as $8 billion.

The FTSE 100 Index retreated 64.55 points, or 1.2 percent, to 5,553.29 in London, extending this week’s decline to 3 percent. The benchmark gauge fell 2.1 percent in April. The FTSE All-Share Index declined 1 percent today, while Ireland’s ISEQ Index climbed 0.7 percent.

Investors “have been ditching stocks today as wave after wave of negative news rocked the market,” said London-based Manoj Ladwa, a senior trader at ETX Capital. “Concerns that Australia could impose a tax on miners has sent the sector reeling. Banking stocks have been sent into a tail spin.”

The FTSE 100 has dropped for three straight weeks amid concern that Europe’s debt crisis will worsen and as Standard & Poor’s downgraded Greek sovereign debt to junk and lowered its credit ratings for Spain and Portugal. European Commission President Jose Barroso today said that he is confident a rescue package for the Greek government will be completed “in days.”

Barclays Capital

Barclays dropped 6.4 percent to 338.25 pence after revenue at its Barclays Capital unit slumped 26 percent to 3.8 billion pounds in the first quarter, missing the 4.9 billion-pound estimate of analyst Mark Phin at Keefe, Bruyette & Woods Ltd.

Rio, the world’s third-largest mining company, fell 4.4 percent to 3,379 pence before Australia’s Treasury Secretary Ken Henry releases his review of the tax system on May 2.

Australia, the biggest iron ore and coal exporter, may introduce a 40 percent tax on mining profits, which would make it the world’s most highly taxed mining country, Citigroup Inc. wrote in an April 27 report.

Shares of Xstrata fell 4.1 percent to 1,086.5 pence, while rival BHP Billiton Ltd., the biggest mining company, slipped 3.1 percent to 2,025.5 pence.

BP lost 1.5 percent to 575.5 pence, extending yesterday 6.5 percent sell off. Sanford Bernstein & Co. said in a report today that the control and clean up the oil spill caused by an explosion at the Deepwater Horizon in the Gulf of Mexico may cost BP as much as $8 billion before tax.

Citigroup said the oil company and partners may have to pay as much as $700 million. With a 65 percent stake in the Macondo well, the total cost of the spill to BP may rise to $450 million, Citigroup analyst Mark Fletcher said in a note to investors yesterday. This would represent about 2 percent of the London-based company’s earnings this year, he said.

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

C&C Group Plc (GCC ID) jumped 15 cents, or 4.4 percent, to 3.59 euros in Dublin after the cider maker said it agreed to sell its spirits unit for 300 million euros ($399 million). The sale prompted Goodbody Stockbrokers to raise its price estimate for C&C’s shares to 3.75 euros from 3.45 euros.

GKN Plc (GKN PLC) lost 8.2 pence, or 5.7 percent, to 137 as UBS AG lowered its recommendation for the U.K. marker of aircraft components for Airbus SAS to “neutral” from “buy.”

Rentokil Initial Plc (RTO LN) declined 5.5 pence, or 4.1 percent, to 127.4 after the world’s biggest pest-control company reported a 4.3 drop in revenue to 607.3 million pounds, citing “challenging market conditions.”

“The key thing I think people are looking for is the revenue line to start to improve,” said Tony Shepard, an analyst at Charles Stanley in London who has an “accumulate” rating on the shares.

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

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