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U.K. Stocks Drop as Euro-Area Leaders Split; Mining Shares Fall

U.K. stocks retreated for the third time in four days led by a selloff in banks and mining companies amid concern European leaders are far from agreeing on a solution to containing the region’s debt crisis.

Barclays Plc (BARC) led a gauge of lenders to the biggest decline since Oct. 4. Rio Tinto Group and Anglo American Plc (AAL) lost more than 3 percent as copper tumbled in London. Debenhams Plc (DEB) rallied 7.7 percent after reporting increased profit and as data showed an unexpected gain in U.K. retail sales.

The FTSE 100 Index (UKX) lost 65.81, or 1.2 percent, to 5,384.68 at the close in London after climbing 0.7 percent yesterday. The FTSE All-Share Index (ASX) declined 1.2 percent, while Ireland’s ISEQ Index slipped 0.4 percent.

“You’ve got an incredibly uncertain outlook in Europe,” George Godber, a London-based fund manager at Matterley, said in a Bloomberg Television interview. “We are stuck in the risk-on, risk-off roundabout that won’t get resolved until Europe shows some sort of clarity.”

The FTSE 100 had advanced for the past three weeks, amid optimism that European policy makers would devise a plan to help solve the debt crisis that has Greece teetering on the edge of a default. Even so, the benchmark gauge has slumped 12 percent from this year’s high on Feb. 8.

ECB Role

France and Germany disagreed over the European Central Bank’s role, threatening to hinder progress on the rescue strategy that global policy makers have demanded. Finance ministers meet tomorrow before a full euro-area summit two days later. Stocks extended losses today after Germany’s Die Welt newspaper reported that the country hasn’t ruled out postponing the summit on Oct. 23 because of stalling negotiations on the bailout fund, the European Financial Stability Facility.

Barclays paced the selloff in banks, tumbling 4.2 percent to 172 pence. Lloyds Banking Group Plc (LLOY) sank 4.5 percent to 31.65 pence and Royal Bank of Scotland Group Plc retreated 3.4 percent to 23.63 pence.

A gauge of U.K. banks shares dropped 2.6 percent, the biggest selloff since Oct. 4 as the cost of insuring against default on European corporate debt climbed.

Mining companies retreated as copper and zinc led a decline among base metals amid political wrangling in Europe. Three- month copper tumbled as much as 6.6 percent on the London Metal Exchange.

Rio Tinto, the world’s second-largest mining company, lost 3.9 percent to 3,015 pence. Xstrata Plc declined 3.3 percent to 895.8 pence and Vedanta Resources Plc slid 3.6 percent to 1,132 pence.

Anglo American also retreated, falling 4 percent to 2,280.5 pence, as the company said third-quarter copper output decreased 9 percent.

Fresnillo Falls

Fresnillo, the world’s largest primary silver producer, dropped 3.7 percent to 1,498 pence. Silver and gold declined with a rally in the dollar, curbing demand for precious metals as an alternative investment.

Petropavlovsk Plc (POG) gained 1.9 percent to 688 pence as the Russian gold miner reported a 65 percent jump in third-quarter output after production increased at its Pioneer site.

Debenhams surged 7.7 percent to 67.6 pence, its highest price in three months. The U.K.’s second-largest department- store owner reported a 4.4 percent increase in annual pretax profit to 157.7 million pounds ($248 million), exceeding analysts’ estimates.

Next Plc (NXT), the U.K.’s second-largest clothing retailer, rallied 2.9 percent to 2,614 pence, Marks & Spencer Group Plc (MKS), the biggest clothing retailer, gained 1.1 percent to 332.6 pence and Home Retail Group Plc (HOME), which tumbled 17 percent yesterday, climbed 3.9 percent to 103.4 pence.

Retail Sales Rise

The Office for National Statistics reported an unexpected rise in U.K. retail sales for September. Sales including fuel climbed 0.6 percent from August for their biggest gain since April.

Pace Plc (PIC) plunged 13 percent to 80 pence after the world’s biggest maker of television set-top boxes said its 2011 operating profit will probably drop below its previous guidance of $150 million to $170 million. Pace cited flooding problems with a supplier of hard-disk drives in Thailand.

Drax Group Plc (DRX), the operator of Europe’s largest coal-fired power plant, surged 10 percent to 529 pence.

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

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

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