Most U.K. Stocks Drop; Royal Bank of Scotland Declines, BT Gains

Most U.K. stocks dropped as concern mounted that some European countries will default on their debt, weakening financial shares including Royal Bank of Scotland Group Plc.

RBS sank 2.7 percent. ICAP Plc lost 4.1 percent as Credit Suisse Group AG downgraded the shares. BT Group Plc, the U.K.’s largest fixed-line phone company, rallied 6.1 percent after it posted increased operating profit because of lower costs and more high-speed broadband customers.

The benchmark FTSE 100 Index was little changed, sliding less than 0.1 percent to 5,815.23 at the 4:30 p.m. close in London. The gauge rallied 3.5 percent last week, reaching its highest level in two years, after the U.S. Federal Reserve pledged to buy more securities to boost the economic recovery. The FTSE All-Share Index slipped 0.1 percent today, while Ireland’s ISEQ Index retreated 1.3 percent.

“Investors remain very worried about the situation in Ireland,” Christian Parisot, a Paris-based strategist at Aurel BGC, wrote in an e-mail today. “Ireland’s parliament is still involved in a tough debate regarding the austerity program needed to rein in the budget deficit.”

RBS Declines

RBS, Britain’s biggest government-owned lender, slumped 2.7 percent to 41 pence as the cost of insuring Irish government debt against default rose to a record. The FTSE 350 Banks Index fell 0.6 percent, the measure’s second day of declines.

RBS dropped because the bank has 42.2 billion pounds ($68.1 billion) of Irish debt, according to MFGlobal Securities Ltd. analyst Shailesh Raikundlia.

Irish bond yields soared as concern mounted that the government will need assistance to bail out its banks. RBS, which has an Irish unit, had 37.8 billion pounds of loans in Ireland and 4.3 billion pounds of sovereign debt according to stress tests in July, Raikundlia said.

ICAP, the world’s largest broker of trades between banks, declined 4.1 percent to 473.6 pence. Credit Suisse cut its recommendation on the shares to “neutral” from “outperform.”

Cookson Group Plc sank 5.8 percent to 530.5 pence after the world’s biggest maker of ceramic linings for metal smelters declined to upgrade its forecast for a fourth time in 2010.

“The sector wants upgrades to justify the recent strong performance and in the absence of any upgrade, the shares have continued to roll over,” Altium Capital Ltd. analyst Steve Medlicott said by telephone.

BT, Antofagasta Rise

BT gained 6.1 percent to 169.1 pence. Earnings before interest, taxes, depreciation, amortization and costs from job cuts climbed to 1.45 billion pounds in the three months through September. Analysts had estimated earnings at 1.42 billion pounds, according to a Bloomberg survey. Sales fell 1.8 percent to 4.98 billion pounds. The company now predicts full-year adjusted earnings of about 5.8 billion pounds.

Antofagasta Plc rallied 4.8 percent to 1,472 pence. Xstrata Plc climbed 3.7 percent to 1,419 pence. Copper climbed 1.3 percent, leading base metal prices higher.

Ferrexpo Plc soared 11 percent to 395.9 pence, its highest price since June 2008. The iron-ore producer operating in Ukraine reported record quarterly output. BofA Merrill Lynch Global Research raised its recommendation on the stock to “buy” from “underperform.”

To contact the reporter responsible for this story: Adam Haigh in London at ahaigh1@bloomberg.net;

To contact the editor responsible for this story: David Merritt at dmerritt1@bloomberg.net.

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