U.K. mining stocks climbed as nickel rose for a second day. BHP Billiton Ltd. and Rio Tinto Group paced the advance.

Wolseley Plc limited gains on the FTSE 100 Index as Lennar Corp., the largest U.S. homebuilder, reported a drop in earnings. Barclays Plc shares retreated. Next Plc advanced amid speculation the retailer may receive a takeover approach. Diageo Plc gained after Dresdner Kleinwort recommended investors increase their holdings in the liquor maker.

The benchmark FTSE 100 added 5, or less than 0.1 percent, to 6296.90 in London at 3:25 p.m. The measure earlier rose as much as 0.7 percent. The FTSE All-Share Index was little changed at 3274.07. Ireland’s ISEQ Index lost 70.10, or 0.7 percent, to 9378.54.

BHP Billiton, the world’s largest mining company, climbed 1.1 percent to 1121 pence. Rio Tinto, Europe’s third-largest mining company and which is planning two nickel projects in Indonesia and the U.S., advanced 1 percent to 2872 pence.

Nickel rose on concern delays to mining projects will exacerbate a shortage of the metal, forcing consumers to rely on dwindling inventories. Aluminum and tin also gained on the London Metal Exchange.

Mining has been one “of the most depressed sectors in the market,” said Robin Griffiths, head of asset allocation at Rathbone Unit Trust in London. “Those are probably bargain stocks right now.”

Wolseley

Shares of Wolseley, the world’s biggest distributor of plumbing equipment, dropped 2.2 percent to 1222 pence. Lennar said earnings plummeted in the first-quarter as demand waned in the worst U.S. housing slump in more than a decade. Wolseley makes more than half of its sales in North America.

Morgan Stanley also lowered its price estimate for the U.K. company by 5 percent to 1330 pence a share, citing revision to operating forecasts for 2007 and 2008.

“The most significant change in our forecasts is the reflection of additional drag factors on housing activity in the U.S.,” analysts wrote in a note to clients.

Barclays, the third-largest U.K. bank, retreated 2.4 percent to 724 pence.

President Robert Diamond said he is “very confident” about Barclays’ talks to buy ABN Amro Holding NV, the biggest Dutch bank.

The U.K. bank said on March 20 it agreed on some merger terms with ABN Amro.

Next

Next, the U.K.’s third-largest clothes retailer, rallied 2.9 percent to 2293 pence on speculation the company may receive a takeover bid of 2500 pence a share.

“I am not sure where the 2500 pence price tag came from but traders are keen not to miss out on the next blue chip private equity target,” said Martin Slaney, head of spread betting at GFT Global Markets in London.

Alistair Mackinnon-Musson, a spokesman for Next, declined to comment.

Diageo, the world’s largest liquor maker, increased 1.2 percent to 1017.5 pence after Dresdner raised its recommendation for the shares to “add” from “hold,” saying earnings growth may be up to 8 percent more than forecast for 2007.

“The U.S. market remains in healthy growth and Diageo’s share continues to grow,” analysts wrote in a note to investors. “Emerging markets remain exciting.”

The following stocks also gained or fell in the U.K. market. Stock symbols are in parentheses.

Cairn Energy Plc (CNE LN) retreated 36 pence, or 2.2 percent, to 1598 pence. The U.K.-based oil explorer posted a loss of $82 million in 2006 as production declined and a writedown on its Sangu project weighed on full-year results. Revenue rose to $286.3 million from $262.6 million in 2005, missing the median estimate of $288.3 million in a Bloomberg News survey.

FKI Plc (FKI LN), whose conveyors pack soda cans for PepsiCo Inc., rallied 6 pence, or 5.4 percent, to 117 on speculation potential bidders, including Melrose Plc, have come forward to buy hardware and material-handling units that are up for sale.

Melrose is one of the names circulating in the market as potential bidder, said Andy Chambers, an analyst at Man Securities in London.

Nick Fox, a spokesman for London-based Melrose, declined to comment. A call seeking comment from FKI external spokesman James Olley wasn’t immediately returned.

Imperial Energy Corp. (IEC LN) surged 65 pence, or 4.6 percent, to 1490. The company which produces oil and gas in Russia and Kazakhstan jumped to a record after reporting estimated resources on 22 prospects following an audit of assets in the Tomsk region of western Siberia.

Pearson Plc (PSON LN) fell 14.5 pence, or 1.7 percent, to 854 pence, snapping a four-day rally. Dresdner Kleinwort yesterday lowered its recommendation for the owner of Penguin Books and the Financial Times newspaper to “hold” from “add,” citing the “dramatic share-price appreciation.”

“For the second time in three months, the share price has been lifted by breakup rumors,” analysts wrote in a note to investors. “The key question is if a bid will be forthcoming this around and at what price.”

Signet Plc (SIG LN) rallied 5.5 pence, or 4.6 percent, to 124 after Morgan Stanley raised its recommendation for the world’s largest specialty jewelry retailer to “overweight” from “equal-weight,” citing the possibility of a merger with Zale Corp. of the U.S.

The brokerage also raised its share-price estimate for the stock by 29 percent to 135 pence.

“A merger with Zale would transform the Signet investment case, sending fair value to around 160 pence per share, possibly more,” analysts wrote in a note clients.

Wood Group Plc (WG/ LN) dropped 16.5 pence, or 5.8 percent, to 270.5. The oilfield-services and engineering provider said the company’s chairman, Ian Wood, plans to sell as many as 50 million shares as he seeks to diversify his family’s investments. The Wood family will own about 24 percent of the company once the sale is complete.

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