Falling UK Stocks as North Korea Shells Neighbor

UK stocks fell, sending the FTSE 100 lower for a third day after North Korea fired artillery shells in South Korea and inflation concerns led Chinese shares lower.

Standard Chartered Plc lost 2.7 percent. Bank of Ireland Plc and Allied Irish Banks Plc fell for a second day in Ireland. BHP Billiton Ltd., the world's largest mining company, and Rio Tinto Group declined at least 2.2 percent.

The benchmark FTSE 100 fell 99.55, or 1.8 percent, to 5581.28 at the close at 4:30 pm in London, the worst performance for three days from 1 July. The FTSE All-Share Index dropped 1.7 percent, while the Irish ISEQ Index fell 3.4 percent.

South Korean fighter jets scrambled and returned fire after North Korea fired dozens of shells in the water and on an island, killing two soldiers. Television footage showed smoke rising from the island of Yeonpyeong northwest coast of South Korea, where the bombardment set fire to houses, local TV channel YTN said.

"Investors are rattled by North Korea's neighbor and bombing are still worried about how far the spread of sovereign debt spreads," said Peter Braendle, a fund manager at Swisscanto Asset Management AG in Zurich, which oversees U.S. $ 62 billion.

Stocks fell around the world after Ireland international bailout failed to stem the concern that Europe's crisis of sovereign debt will be extended to other indebted countries such as Portugal and Spain.

Irish Election

The Irish Prime Minister Brian Cowen, yesterday afternoon, said it would seek national elections next year after the government approves its 2011 budget. The announcement came hours after the Green Party said it would withdraw from the coalition in power after the budget vote, said Cowen deceived voters in negotiating the bailout.

Bank of Spain fell 25 percent to 29.2 cents. Irish allies fell 19 percent to 33 cents. European Union officials estimate that a rescue package for Ireland can be up to about 85 million euros (114 billion U.S. dollars), according to two officials familiar with the talks.

Standard Chartered, the UK lender that generates most of its profit in Asia, fell 2.7 percent to 1,737 pence, while HSBC Holdings plc retreated 1.5 percent to 643.9 pence, the lowest price from 31 August.

Barclays lost 2.1 percent to 264.25 pence. Two transfers to the lender in the UK for a total of about $ 1.3 billion of Lehman Brothers Holdings Inc. in September 2008 may have violated securities laws, the Securities and Exchange Commission, said .

Metals Fall

Resources stocks tumbled basic metals prices fell for the third consecutive day. China stocks slid as concern mounted that the government will step up measures to control inflation, which could slow consumption in the world's largest user.

China's largest banks are close to the annual loan quota and a plan to stop the expansion of their loan portfolios to avoid exceeding the limits, according to four people briefed on the matter.

BHP Billiton lost 2.2 percent to 2,268 pence as copper, zinc and aluminum fell on the London Metal Exchange. Rio Tinto fell 2.8 percent to 4,070 pence. Xstrata Plc, the largest exporter of coal used for power, shed 2.2 percent to 1,270 pence.

Mitchells & Butlers Plc, the British owner of All Bar One chain, fell 2.6 percent to 344.6 pence, as it recorded a loss for the year on lower sales of beverages in their bars.

Laird Plc rose the most in more than three months, gaining 9.1 percent to 152 pence. The largest manufacturer of electromagnetic shields for mobile phones has announced it will buy Cattron International Group Inc. for $ 90 million in cash. The agreement is "significant improvement in revenue" in 2011, the company said.

De La Rue Plc, the world's largest printer of banknotes, plunged 11 percent to 557.5 pence after it said it "remains uncertain" about the financial impact of a stop on shipments of paper. In September, De La Rue found that some employees had deliberately falsified some test certificates role specification for certain customers.