* FTSE 100 down 1.5 pct, reverses Wednesday's gains
* Banks and oils pull down index
* BoE interest rate verdict eyed
By Michael Taylor
LONDON, July 10 (Reuters) - Britain's blue-chip index shed
1.5 percent by midday on Thursday, as investors tracked a large
slide in U.S. markets overnight and as oil and banking stocks
weighed ahead of a Bank of England interest rate decision.
At 1030 GMT the FTSE 100 <> was down 85.0 points, or
1.5 percent at 5,444.6, reversing the 1.6 percent rise in the
previous session. Britain's biggest trading index is now down
15.5 percent for the year.
Beaten-down banks weighed on the FTSE 100, with Barclays
<BARC.L>, HSBC <HSBA.L>, Royal Bank of Scotland <RBS.L> and
Lloyds TSB <LLOY.L> down 0.5-3.3 percent.
U.S. markets tumbled overnight, with shares in Fannie Mae
<FNM.N> and Freddie Mac <FRE.N> slumping as investors feared the
two pillars of the U.S. housing market would have to raise
billions through share sales. Merrill Lynch <MER.N> fell after
credit-rating agency Fitch said it may cut the bank's debt
rating.
Heavyweight oil shares also lost ground, as U.S. crude
<CLc1> steadied at under $136 a barrel, off recent record highs.
BP <BP.L>, Royal Dutch Shell <RDSa.L> and BG Group <BG.L> shed
1.4-2.3 percent.
"It was a short reprieve yesterday," said Manus Cranny at MF
Global Spreads. "The biggest issue is financials again today. A
very difficult opening, a very difficult market."
"The only thing that might draw some (further) reprieve is
that oil may turn lower, and if that happens it will really help
all of the central banks ... It will withdraw that inflationary
fear we have, which potentially leads to higher rates.
"The BoE has absolutely no option but to leave rates
unchanged. With the economy in a fairly parlous state, they
don't have the ability to raise rates," he said.
The BoE will announce its verdict at 1100 GMT, with analysts
expecting the central bank rates to hold its key interest rate
steady at 5 percent.
EXPERIAN TOPS GAINERS
Among companies with trading updates, credit information
firm Experian <EXPN.L> was one of the few FTSE 100 stocks
trading in positive territory.
Experian added 4.6 percent to top the FTSE 100 leaderboard
after it posted a 1 percent rise in first-quarter revenues as
acquisitions helped it beat forecasts that revenue would shrink
due to continued U.S. weakness. []
Also on the upside, midcap Barratt Developments <BDEV.L>
rose 9.7 percent after it said it was to cut 1,200 jobs to cope
with the downturn in the housing market and would not pay a
final dividend for 2007-08. []
The housebuilder also said it had agreed a restructuring of
covenants with banks and private placement note providers "well
in advance, as an appropriate, prudent response to current
market conditions".
Rival builder Taylor Wimpey <TW.L> gained 9.1 percent.
Britain's biggest commercial broadcaster ITV <ITV.L> lost
5.8 percent to 40.5 pence after analysts at UBS predicted a
sharp deterioration in the UK TV advertising market in
September.
Retailer Kingfisher <KGF.L> dipped 5.7 percent after Goldman
Sachs cut its price target and added the company to its
"conviction sell list".
London Stock Exchange <LSE.L> fell 2.2 percent, paring some
of its 10 percent gain on Wednesday, when it said first-quarter
revenue rose 8 percent to 178 million pounds.
Among other midcaps, F&C Asset Management <FCAM.L> plummeted
20.6 percent on talk that its second biggest shareholder,
investment firm Dawnay Day, was selling most of its stake in the
company, market sources said. []
"We are in a bear market, that is accepted," said Howard
Wheeldon, senior strategist at BGC Partners. "It is rare to see
such frenetic day-to-day gyrations of volatility."
"We are now into a period of intense nervousness ahead of
the second quarter (earnings). It can only get worse before it
gets better but for all that I think we're getting close to the
bottom."
(Additional reporting by Dominic Lau and Atul Prakash; Editing
by Quentin Bryar)
