REFILE-Barclays stake sale dents banks, weighs on FTSE

                                
 (Refiles to correct spelling of deterioration in paragraph 4)
                                
 * FTSE 100 down 0.6 pct
                                
 * Stake sale in Barclays from Abu Dhabi dents banks
                                
 * Kingfisher up on results, boosts M&S, Sainsbury
                                
 
                                
 By Simon Falush
                                
 LONDON, June 2 (Reuters) - Banks fell after a major
shareholder sold its holding in Barclays <BARC.L>, denting the
FTSE 100 by midday on Tuesday, though losses were partially
offset by strength in retailers, boosted by strong Kingfisher
<KGF.L> results.
                                
 By 1044 GMT, Britain's leading share index <.FTSE> was down
26.26 points, or 0.6 percent, at 4,479.93 after advancing 2
percent on Monday to its highest close since early January.
                                
 Barclays headed the list of blue-chip laggards, down 13.8
percent after the Abu Dhabi government-owned International
Petroleum Investment Company (IPIC) sold an 11 percent stake,
raising fears the rally in bank shares may be over.
[ID:nL2185843]
                                
 "It's clear that the banking sector is under-capitalised and
will struggle in the event that there is further deterioration
in economic activity," said Jeremy Batstone-Carr, strategist at
Charles Stanley.
                                
 "Sentiment is very brittle and any indications of increased
stress will lead to a sharp retracement of their recent
recovery."
                                
 Also weighing on banks, American Express Co <AXP.N> and
JPMorgan Chase & Co <JPM.N> fell in after-hours trading on Wall
Street after both unveiled plans to raise further equity.
                                
 HSBC <HSBA.L>, Standard Chartered <STAN.L>, Royal Bank of
Scotland <RBS.L> and Lloyds Banking Group <LLOY.L> fell 1.6 to
3.7 percent.
                                

                                
 KINGFISHER TAKES OFF
                                
 Europe's biggest home improvements retailer, Kingfisher
<KGF.L>, was the strongest blue-chip gainer, up 5.3 percent
after it beat forecasts with a 40 percent jump in first-quarter
profit on higher sales at its B&Q stores in Britain.
[ID:nL11797]
                                
 Peer Home Retail <HOME.L> also got a boost from the results,
up 3.7 percent, while high street stalwarts Marks & Spencer
<MKS.L> and Sainsbury <SBRY.L> gained 1.4 and 1.3 percent,
respectively.
                                
 Pharmaceuticals, conversely, were a drag on the index as
investors rotated out of the sector. AstraZeneca <AZN.L> fell
1.9 percent and GlaxoSmithKline <GSK.L> dropped 0.7 percent.
                                
 British mortgage approvals were slightly higher than
expected in April, but were still at a level that points to
further house price falls, official data showed, while consumer
credit was also slightly higher than forecast. [ID:nBOE001887]
                                
 Investors will now turn their attention to U.S. April
pending home sales numbers at 1400 GMT.
                                
 Martin Jacomb, the one-time deputy chairman of Barclays and
director of the Bank of England, said the Financial Services
Authority should be absorbed into the central bank, as the
current financial stability regime is a "disaster", the
Financial Times said.
                                
 Meanwhile, a UK parliamentary committee also said the task
of maintaining financial stability in Britain should be removed
from the FSA and handed back to the Bank of England.
[ID:nL1123389]
 (Editing by David Cowell and Simon Jessop)