Banks and commods dent FTSE

By David Brett

LONDON (Reuters) - A cut in the UK's ratings outlook from agency Standard & Poors weighed on Britain's top share index, with weakness in heavyweight oils, miners and banks contributing to a 2.1 percent by midday on Thursday.

At 11:33 a.m., the FTSE 100 index was 94.46 points lower at 4,373.95 having closed 13.84 points lower on Wednesday.

S&P revised down its ratings outlook for the UK to negative from stable, prompting already weak UK stocks to fall further and the pound to slip sharply against the dollar.

The bleak picture for the UK's finances was reinforced by data showing public borrowing hit a record high for an April since records began in 1984.

"Today's figures marked an inauspicious start to the new financial year. And coupled with S&P's surprise decision to put the UK on negative outlook - the cherished AAA rating is now under threat - the spotlight is very much on the state of the public finances," says Colin Ellis of Daiwa Securities.

Banks weighed heaviest on the UK blue chip index, with HSBC <HSBA.L>, Royal Bank of Scotland <RBS.L>, Barclays <BARC.L>, Standard Chartered <STAN.L>, and Lloyds Banking Group <LLOY.L> shedding 2.8 to 3.5 percent.

The S&P announcement and borrowing data took the shine off numbers from the Office of National Statistics which showed British retail sales rose at nearly double the rate expected by analysts in April, gaining 0.9 percent month-on-month.

Commodity issues fell as worries about the U.S. economic recovery created demand concerns, after the Fed lowered its 2009 forecast for GDP on Wednesday, undercutting recent optimism that the economy might be turning the corner.

"The Fed comments have cast uncertainty over things. After we started to have a lot of talk about green shots the Fed has really eliminated a lot of this," said Daniel Harris, a trader at CFD specialists Blue Index.

Oil majors fell back as crude weakened, with Royal Dutch Shell <RDSa.L>, BP <BP.L>, BG Group <BG.L>, Cairn Energy <CNE.L>, and Tullow Oil <TLW.L> all down between 0.2 and 2.3 percent.

Miners retreated with lower metal prices, led by Kazakhmys <KAZ.L> and Eurasian Natural Resources <ENRC.L> down 6.6 and 7.4 percent respectively, while BHP Billiton <BLT.L>, Xstrata <XTA.L>, and Rio Tinto <RIO.L> fell 2.6 to 5.1 percent.

BRITISH LAND, C&W RESULTS WEIGH

Property group British Land <BLND.L> slid 6.4 percent after it saw its full-year net asset value tumble 64 percent to 398 pence a share, below the average forecast of 423.6 pence.

Other real estate stocks suffered as well, with Land Securities <LAND.L>, Hammerson <HMSO.L>, and Liberty International <LII.L> losing 3.9 to 6 percent.

Cable & Wireless <C&W.L> was the biggest blue-chip faller, down 8 percent as a disappointing outlook with its full-year results and market talk of share selling by directors weighed.

The telecoms group posted full-year earnings up 36 percent on Thursday following an operating overhaul and acquisition synergies, and some analysts said the forecast growth for 2010 was weaker than hoped.

ICAP <IAP.L> shed 7.2 percent, extending the previous session's sell-off following confirmation after the market close on Wednesday that the firm's founder and chief executive, Michael Spencer, had sold a chunk of shares in the inter-dealer broker.

There were just five blue chip risers with Capita <CPI.L>, Unilever <ULVR.L>, Astrazeneca <AZN.L>, Tullow <TLW.L> and Lonmin <LMI.L>, up between 0.1 and 1.8 percent.

(editing by John Stonestreet)

Article Published: 21/05/2009