U.K. stocks dropped for a fifth day, sending the FTSE 100 Index to a two-month low after a report showed the British economy contracted in the fourth quarter by the most since 1980. Barclays Plc and Legal & General Group Plc slumped by at least 9 percent as U.K. gross domestic product shrank more than economists’ forecasts. BHP Billiton Ltd. and BP Plc led commodity producers lower as crude and metals prices retreated. The benchmark FTSE 100 fell 46.04, or 1.1 percent, to 4,006.19 at 12:09 p.m. in London. The index has declined 3.4 percent this week, led by a sell-off in financial shares as investors speculate banks may need to take more writedowns or the government may have to nationalize one or more of them. The broader FTSE All-Share Index lost 1.2 percent today, while Ireland’s ISEQ Index added 0.7 percent. The Office for National Statistics said GDP fell 1.5 percent from the previous quarter, missing economists forecast of a 1.2 percent retreat, according to a Bloomberg News survey. Manufacturing dropped 4.6 percent and construction fell 1.1 percent. The economy has now shrunk in two quarters, the conventional definition of a recession. “Clearly this sets a very weak platform for GDP Growth this year,” said David Buik, a London-based market analyst at BGC Partners. The “figures confirm that the economy plunged into recession at the end of last year.” Barclays slumped 15 percent to 50.5 pence, falling for a ninth session. Analysts at Sanford C. Bernstein said the shares are now trading at price that indicates investors give the lender a 70 percent chance of nationalization. Royal Bank Falls Royal Bank of Scotland Group Plc, facing the biggest loss in British history, fell 2.5 percent to 11.9 pence. Lloyds Banking Group Plc, the U.K.’s biggest mortgage lender, slid 4.5 percent to 46.9 pence. A gauge of U.K banks has tumbled 15 percent this week. Legal & General led a drop among U.K. insurers amid concern they may run short of funds. Britain’s third-biggest life insurer dropped 9 percent to 53.5 pence. Prudential Plc, the second- largest, fell 5.4 percent to 290 pence. “There are concerns over liquidity,” said Kevin Ryan, a London-based analyst at ING Groep NV. “There is just general panic. The business outlook is clearly muted by the economic situation.” Officials at Prudential and Legal & General declined to comment. BHP, the world’s biggest mining company, declined 1.6 percent to 1,143 pence as base metals fell and analysts downgraded the shares. Anglo American Plc, the world’s fourth- largest diversified mining company, slipped 2.1 percent to 1,242 pence. Sapping Demand Copper and aluminum headed for a second consecutive weekly decline in London on concern that economic slowdowns in the U.S. and China are set to deepen, sapping demand for industrial metals. Nomura Holdings Inc. also downgraded BHP and Anglo American to “neutral” from “buy.” BP dropped 2.2 percent to 479 pence as crude oil declined after U.S. stockpiles rose more than four times forecast last week, raising concern of an oversupply as the global recession deepened. Smaller rival Cairn Energy fell 1.1 percent to 1,778 pence. The contract for March delivery lost as much as 4 percent to $41.93 a barrel in electronic trading on the New York Mercantile Exchange.

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