* Banks extend Friday recovery
* Utilities in demand on Northumbrian takeover reports
* Commodities weaker; China demand concerns linger
By David Brett
LONDON, Feb 1 (Reuters) - Britain's top share index was flat
at midday on Monday as gains in financial stocks and utilities
was countered by falls in commodity issues, weighed down by
fresh fears China could tighten its monetary policy.
By 1206 GMT, the FTSE 100 <> was down 3.47 points at
5,185.05, consolidating after gains of 0.8 percent on Friday.
Banks extended Friday's rebound, with HSBC <HSBA.L>,
Standard Chartered <STAN.L>, Barclays <BARC.L>, and Lloyds
Banking Group <LLOY.L> up 0.6 to 2.2 percent.
Royal Bank of Scotland (RBS) <RBS.L>, up 2.5 percent,
shrugged off speculation that JPMorgan Chase <JPM.N> only wants
the non-U.S. operations of RBS Sempra, the bank's commodities
unit, having previously entered talks to buy the whole business.
[]
"It looks like bargain hunting, following the bad week the
banks experienced last week," said Jim Wood-Smith, head of
research at Williams de Broe.
Life insurers joined in the rally by financials. Legal &
General <LGEN.L>, Aviva <AV.L>, Standard Life <SL.L> and
Prudential <PRU.L> rose 0.4 to 2.1 percent.
Utilities were in demand after the Sunday Times reported
mid cap Northumbrian Water <NWG.L> could receive a 1.7 billion
pound takeover offer from the Ontario Teachers' Pension Plan, a
Canadian pension fund that already holds a 27 percent stake in
the firm. []
Northumbrian, which was due to release a trading update on
Monday, added 10 percent, while blue chip peers Severn Trent
<SVT.L> and United Utilities <UU.L> gained 3.7 and 2.6 percent
respectively
Airlines were also firmer. British Airways <BAY.L> added 3.1
percent after the Financial Times said its planned alliance with
American Airlines <AMR.N> and Iberia <IBLA.MC> had moved closer
to securing regulatory approval after the European Commission
confirmed it had begun consulting with rival airlines.
The sector got a further boost from a bullish Goldman Sachs
note and Irish airline Ryanair <RYA.I>, which increased its
full-year profit forecast and posted a narrower-than-expected
third-quarter loss. []
Ryanair and mid cap low-cost peer easyJet <EZJ.L> added 5.7
and 2.3 percent, respectively. British Airways is due to report
third-quarter figures on Friday.
Among individual gainers, Rolls-Royce <RR.L> climbed 2.8
percent higher as RBS raised its target price for the aerospace
engineer to 700 pence from 430 pence.
COMMODITIES WEIGH
Commodity issues retreated as the prices of crude oil <CLc1>
and metals fell back on concerns about global growth and
sluggish demand.
Fresh economic data out of China, the world's second-largest
energy consumer, heightened concerns that Beijing would further
tighten monetary policy. []
An official UK purchasing managers index on Monday remained
firmly in expansionary territory, while a companion poll by HSBC
scaled an all-time high. Both reports showing evidence of a
further increase in cost pressures. []
Energy issues fell as oil prices hovered around $73 a
barrel. BG Group <BG.L> and BP <BP.L>, which report
fourth-quarter results later this week, shed 1 percent and 0.8
percent respectively.
Miners were lower as metal prices ran back across the board.
Xstrata <XTA.L>, BHP Billiton <BLT.L>, Anglo American <ANGO.L>
and Rio Tinto <RIO.L> were down 0.3 to 1 percent.
Imperial Tobacco <IMT.L> dropped 0.8 percent as investors
exhibited caution ahead of its trading update, due on Tuesday.
Peer British American Tobacco <BATS.L> lost 0.2 percent.
Fund manager Schroders <SDR.L> was the top blue-chip faller,
down 1.6 percent after Credit Suisse downgraded its rating to
"neutral" from "outperform".
BT <BT.L> shed 1 percent after Shadow Chancellor of the
Exchequer George Osborne said on Sunday the Conservative Party
would loosen BT's hold on the local telephone network.
Wood-Smith at Williams de Broe said he expected the market
to edge lower over the short term.
"Technically it looks like the market is going to go a bit
lower ... Over the next fortnight I'd expect the market to come
down and have a test of the 5,000 level," Wood-Smith said.
(Editing by Karen Foster)
