U.K. Stocks Drop as Mining Companies Decline; FTSE 100 Erases 2011 Advance

U.K. and Irish stocks sank, dragging the benchmark FTSE 100 Index (UKX) to its lowest level in two months, as raw-material shares fell amid lower metal prices and Ryanair Holdings Plc (RYA) said it will cut capacity due to higher costs.

Mining companies Rio Tinto Group and BHP Billiton Ltd. (BHP) fell more than 2 percent. Royal Dutch Shell Plc (RDSA) slid the most in a month as crude declined. Ryanair, Europe’s largest discount carrier, tumbled 5.3 percent. International Consolidated Airlines Group slid the most in 11 months as ash from a volcanic eruption in Iceland threatened trans-Atlantic flights.

The FTSE 100 dropped 112.60, or 1.9 percent, to 5,835.89 at the 4:30 p.m. close in London, the lowest since March 23. The gauge has slipped 0.7 percent in 2011 amid concern that Greece will be unable to repay its debts. The broader FTSE All-Share Index lost 1.9 percent today, and Ireland’s ISEQ Index retreated 1.7 percent.

“It seems wise for us to take some risk off the table and allow our cash positions to build up,” said Lothar Mentel, who oversees about $3.2 billion as the London-based chief investment officer at Octopus Investments Ltd. “Equities remain our preferred asset, and there’s still the possibility that equities could gather upward momentum in the last two quarters of the year, but given the absence of any meaningful forecasting for 2012, this may become a good pricing point at which to take profits.”

Debt Crisis

Elsewhere in Europe, Spain’s Socialists suffered a defeat in local elections as voters punished Prime Minister Jose Luis Rodriguez Zapatero’s party for soaring unemployment and spending cuts. Standard & Poor’s cut Italy’s credit-rating outlook to negative from stable, citing slowing economic growth and “diminished” prospects for a reduction of government debt.

Rio Tinto sank 2 percent to 4,033 pence. BHP Billiton declined 2.4 percent to 2,304 pence. Copper, nickel and tin prices dropped in London.

Shell, Europe’s biggest oil company, declined 2.3 percent to 2,095 pence. BP Plc (BP/) fell 1.7 percent to 452 pence. Crude retreated 2.5 percent to $96.98 a barrel in New York amid concern Europe’s sovereign debt crisis will spread, slowing economic growth and reducing fuel demand.

Ryanair retreated 5.3 percent to 3.36 euros in Dublin after saying it would cut capacity for the first time in its history next winter as higher fuel costs threaten to render swathes of the network unprofitable.

IAG, the parent of British Airways, fell 5.1 percent to 235 pence, the biggest drop since June. A volcanic eruption that began May 21 under Europe’s largest glacier, Vatnajokull, could threaten trans-Atlantic air traffic with ash reaching the U.K. as early as tonight, according to Britain’s weather agency.

Mitie Group Plc (MTO), a U.K. based services and maintenance company, rallied 5 percent to 220.4 pence as full-year revenue topped analysts’ estimates.

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

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

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