By Sarah Turner

LONDON (Dow Jones)--Barclays led the British banking sector lower on Tuesday, with the lender losing ground after Abu Dhabi's International Petroleum Investment Company revealed a plan to sell 1.3 billion shares in the lender.

Barclays (BCS) shares dropped 13.5% to 273 pence after International Petroleum Investment Co. said it's going to sell 1.3 billion shares in the bank, which were worth around 4.1 billion pounds ($6.7 billion) at the previous day's closing price.

"The decision to dispose of some of its interests in Barclays reflects the focus of IPIC's long-term investment strategy on hydrocarbon-related opportunities," said Khadem Al Qubaisi, managing director of International Petroleum Investment Co.

Analysts at Nomura in a note to clients: "The sale of a significant stake by IPIC will come as a considerable surprise to the market and the reported price of 267 pence, or a 15% discount, reflects this and the greater volatility in current markets."

Still, Barclays and other banks rose sharply on Monday, helping to pull the top share index to a closing level not seen since Jan. 7, as investors eyed data that provided more signs that the global economy is stabilizing.

Other lenders giving back some ground on Tuesday included Lloyds Banking Group (LYG), down 4.1%, and Royal Bank of Scotland, down 5.2%.

Overall, the FTSE 100 index retreated 0.7%, or 29.17 points, to 4,477.02.

"Once again the 4,500 level is proving to be a barrier to the FTSE 100," noted strategists at IG Index. "It is definitely starting to look a little tired up at these levels and at the moment it is difficult to see what the catalyst to kick off another major surge higher is going to be," they added.

However, shares of home-improvement retailer Kingfisher rose 3.8% in top index action on Tuesday.

The firm's total retail sales rose 9.6% to 2.6 billion pounds in the 13 weeks to May 2. Outdoor seasonal product sales were boosted by more favorable weather in the U.K. and France and a later Easter compared to last year. Non-seasonal sales continued to decline, the firm noted.

Retail profit rose 40.1% to 128 million pounds, primarily due to a doubling of profit at B&Q stores in the U.K. following higher sales volumes and continuing margin and cost improvements.

"Overall the U.K. generated 61 million pounds earnings before interest and tax, an excellent result and way ahead of expectations. Although management cautions about the seasonal weather uplifts unlikely to be repeated we believe that May has got the second-quarter period off to a cracking start," said analyst Singer Capital Markets analyst Matthew McEachran in a note.

Shares of Home Retail, which owns the Homebase chain of home-improvement stores, rose 2.9%, while Travis Perkins, which owns the Wickes chain, climbed 3.1% outside the top index.

Shares of Plant Health Care rose 2.9%, also outside the top index. The firm said that it has received an order from Monsanto Co. (MON).

Services Desk; Dow Jones Newswires; +44-20-7842-9319/9274