* FTSE set for biggest weekly fall in 12 weeks
* Banks weaker as Obama proposals hang over sector
* Commodities tumble as China fears rumble on
By David Brett
LONDON, Jan 22 (Reuters) - Britain's FTSE 100 was set on
course for its biggest weekly fall in three months at midday on
Friday, as U.S. president's plans to limit banking activities
hit bank shares, while commodities fell on demand fears.
By 1204 GMT, the FTSE 100 <> index was down 65.64
points, or 1.2 percent, at 5,269.46, having fallen 1.7 percent
in the previous session, taking its weekly decline so far to 3.4
percent, which would be the biggest weekly fall in 12 weeks.
Banks were in sharp focus after U.S. President Barack Obama
announced far-reaching proposals to limit the activities of U.S.
lenders. []
The news sent shockwaves through investors who pondered just
how far any potential reforms in the UK would stretch and how
much earnings could be affected.
Barclays <BARC.L>, Royal Bank of Scotland <RBS.L>, Lloyds
Banking Group <LLOY.L> and HSBC <HSBA.L> fell 1.3 to 7.8
percent.
ICAP <IAP.L>, the world's largest inter-dealer broker, was
down 7.5 percent on worries the Obama move will also curb its
business.
Commodities remained under pressure as investors continued
to digest the possible impact on demand, amid fears that China
could tighten its fiscal policy after data released on Wednesday
showed China's economy expanded by 10.7 percent between October
and December.
"We've also got the knock-on effect of the Chinese GDP
figures ... which is arguably as much an influence on the market
as the Obama changes," said Tim Whitehead, investment manager at
Redmayne Bentley.
Miners tracked lower metal prices. Rio Tinto <RIO.L>,
Xstrata <XTA.L>, BHP Billiton <BLT.L>, Anglo American <AAL.L>
and Eurasian Natural Resources <ENRC.L> were the biggest risers,
up 0.2 to 2.3 percent.
The sector also faced pressure on news Australian miners
will face billions of dollars in new taxes. []
Energy stocks, Royal Dutch Shell <RDSa.L>, BP <BP.L> and BG
Group <BG.L> fell 0.4 to 0.8 percent.
The index was knocked further after quarterly results from
U.S. bellwether General Electric <GE.N> failed to reassure
investors. []
"It's difficult to see what would be the catalyst in the
short term for appreciation in this market," Whitehead said.
RETAIL SURPRISE
Data from the UK's Office for National Statistics added to
the gloom after it reported British retail sales volumes rose by
much less than expected in December as a large rise in prices
deterred shoppers from splashing out over Christmas.
The news sent the general retailers down with Home Retail
<HOME.L> off 3.1 percent, while Marks & Spencer <MKS.L>,
Kingfisher <KGF.L> and Next <NXT.L> dropped 0.2 to 0.8 percent.
Profit-takers moved in on pharmaceutical stocks, which were
among a select group of stocks in positive territory in the
previous session on hopes Obama's healthcare plan will stall and
as investor risk appetite waned. []
AstraZeneca <AZN.L>, boosted on Thursday by a Morgan Stanley
upgrade, shed 0.5 percent. GlaxoSmithKline <GSK.L> and Shire
<SHP.L> shed 0.4 and 0.5 percent respectively.
On the upside, mobile telecommunications firm Vodafone
<VOD.L> contributed the single most points to the index, up 0.8
percent recovering losses sustained on Thursday.
British engineer Invensys <ISYS.L> rose 0.8 percent after it
said cost savings and higher margins in its controls unit
delivered better third-quarter operating profit, and it expected
a resumption of large industrial orders.
(Editing by Greg Mahlich)
