* FTSE 100 falls 1.8 pct, shrugging off UK PMI data
* Oils, banks, miners and Vodafone top-weighted losers
* Food retailers, BAE, Drax up, offering some respite
LONDON, June 3 (Reuters) - Britain's blue-chip share index
shed 1.8 percent by midday on Wednesday, led by weakness in
banks, commodity stocks and index heavyweight Vodafone <VOD.L>,
which traded ex-dividend.
By 1034 GMT, the FTSE 100 <> was down 80.22 points at
4,396.80, shrugging off a survey showing that UK services sector
activity unexpectedly returned to growth in May.
Banks took the most points off the index, with Barclays
<BARC.L> down 5.2 percent, extending the previous session's 13.5
percent decline.
Abu Dhabi government-owned International Petroleum
Investment Company on Tuesday sold a more than 11 percent stake
in the British bank.
HSBC <HSBA.L> fell 3.5 percent as traders cited market talk
of Saudi conglomerate Saad Group [] selling down in
Europe's biggest bank. Both Saad and HSBC declined to comment.
Saad's stake fell just under 3 percent in December, meaning
it no longer needed to disclose changes in its holdings.
Within the sector, Royal Bank of Scotland <RBS.L>, Lloyds
Banking Group <LLOY.L> and Standard Chartered <STAN.L> were off
1.8 percent to 4.2 percent.
On the economic front, Britain's service sector staged a
surprise return to growth in May after an increase in new
business and the most optimistic outlook since October 2007, the
monthly services PMI survey showed. []
But the news did not deter investors from sending the index
lower.
"Return to growth ... is good but the question is how
sustainable it is going to be, how rapidly the economy is going
to grow from here," said Peter Dixon, UK economist at
Commerzbank.
"The data today did not give us any insight how far and
quickly we are going to grow. There is still a huge number of
structural issues in the economy which might prevent growth from
picking up."
Later in the session, U.S. ADP employment and factory orders
data will be in focus.
Oil producers were other standout losers as crude prices
<CLc1> ticked lower. BP <BP.L>, Royal Dutch Shell <RDSa.L>, BG
Group <BG.L>, Tullow Oil <TLW.L> and Cairn Energy <CNE.L>
dropped 1.7 percent to 4.1 percent.
In the mining sector, BHP Billiton <BLT.L>, Rio Tinto
<RIO.L>, Xstrata <XTA.L>, Anglo American <AAL.L>, Antofagasta
<ANTO.L>, Lonmin <LMI.L> and Vedanta Resources <VED.L> lost
between 1.6 and 4.8 percent.
Also on the downside, Vodafone sank 4.9 percent after going
ex-dividend.
Cable & Wireless <CW.L>, International Power <IPR.L>,
National Grid <NG.L>, Rexam <REX.L> and WPP <WPP.L> also fell
after trading ex-dividend.
FOOD RETAILERS, TOBACCO SUPPORT
Food retailers were also in demand, after Cazenove upgraded
the sector to "neutral" from "underweight". Tesco <TSCO.L>,
Morrison Supermarkets <MRW.L> and Sainsbury <SBRY.L> put on
between 0.8 and 2.7 percent.
BAE Systems <BAES.L> took on 2.3 percent after Cazenove
repeated its "outperform" rating on the defence contractor
maintaining that the stock "stands out as a value play at
current valuation levels."
Power station operator Drax <DRX.L> advanced 1.9 percent,
boosted by an upgrade to "equal-weight" from Morgan Stanley.
Cigarette makers also traded in positive territory after
Citigroup issued a bullish note on them. British American
Tobacco <BATS.L> put on 0.2 percent and Imperial Tobacco <IMT.L>
added 0.9 percent.
Lloyd's of London insurer Amlin <AML.L> fell 1.8 percent as
it placed 23.5 million shares to help fund its purchase of
Fortis Corp Insurance, a provider of corporate property and
casualty insurance, from the Dutch government for 350 million
euros ($497.5 million).
(Editing by Rupert Winchester)
