Persimmon and other home builders fell after Merrill Lynch cut its 2008 forecast for ``private-sector volumes'''' to a 25% drop from a 15% fall it projected earlier and forecasted no volume growth in 2009 from the previous estimate of a 5% increase.

The brokerage also slashed ratings of Taylor Wimpey, Baratt Developments, Bellway Plc and Redrow.

Financial stocks declined after RBS announced plan for a £12 billion right issue and for now keep its dividend payout ratio at 45% of earnings, however dividend per share will decline dramatically. RBS plans to issue additional 11 shares for every 18 shares.

RBS stock shed 3.89%, HBOS Plc fell 3.70% and Barclays declined 3.66%.