* FTSE 100 down 0.4 percent, touches two-week low
* Stronger dollar hits miners, energy stocks
* Banks rally after recent falls
By Tricia Wright
LONDON, Oct 27 (Reuters) - Weak commodities stocks dragged
down Britain's top share index on Wednesday, as growing doubts
over the size of the U.S. Federal Reserve's next economic
stimulus buoyed the dollar, hurting oil and metals prices.
By 1124 GMT, the FTSE 100 <> was down 23.35 points, or
0.4 percent, at 5,683.95, having touched its lowest in two weeks
at 5,654.07.
"(There is) ... uncertainty around the scale of QE2 from the
Fed (which is) taking the markets off a bit," Joshua Raymond,
market strategist at City Index, said.
"(People) expect QE2, and now they're debating exactly what
levels of QE2 we're likely to see. I think there have been some
murmurs around the $200 billion mark which has disappointed a
few people," he said.
The Wall Street Journal said the Federal Reserve was likely
to reveal a programme of U.S. Treasury bond purchases worth a
few hundred billion dollars over several months. []
A Reuters survey this month found U.S. primary dealers'
projections for the size of the Fed's expected quantitative
easing ranged from $500 billion to $1.5 trillion.
Miners <.FTNMX1770> were the biggest drag on the index, with
copper <CMCU3> off 1.9 percent.
Xstrata <XTA.L> fell 2.4 percent after it revised terms on
its A$428 million ($422 million) takeover offer for Australia's
Sphere Minerals <SPH.AX>, following a move by a Singaporean firm
to acquire a blocking stake in the target.
It was a similar story with energy stocks <.FTNMX0530>, with
crude <CLc1> easing on the firmer dollar.
British American Tobacco <BATS.L>, the world's
second-biggest maker of cigarettes, slid 0.9 percent after it
posted a bigger-than-expected 3 percent fall in underlying
nine-month volumes and said the recession's impact on smokers
showed no sign of abating. []
BANKS BOUNCE
Banks <.FTNMX8350> helped limit the FTSE's losses, bouncing
back after falls in the previous session when sentiment was hit
by a loss at UBS's <UBSN.VX> investment bank.
Royal Bank of Scotland <RBS.L> grabbed top spot on the
blue-chip leaderboard, up 2.4 percent, while Barclays <BARC.L>,
up 1.9 percent, took second.
Strength was also seen among defensive stocks, with United
Utilities <UU.L> up 1.3 percent and Severn Trent <SVT.L> 0.7
percent higher.
British Airways <BAY.L> rose 0.8 percent after Spanish
carrier Iberia <IBLA.MC> called a shareholder meeting for Nov.
29 to vote on its planned merger with the British airline.
With the index briefly slipping below support around 5,660,
the next key areas are levels around 5,600 where the Oct. 8 and
Oct. 12 lows sit, CMC Markets analyst Michael Hewson said.
U.S. stock index futures <SPc1> <DJc1> <NDc1> pointed to a
lower opening on Wall Street on Wednesday, ahead of September's
U.S. durable goods and new home sales data, scheduled for
release at 1230 GMT and 1400 GMT respectively.
GlaxoSmithKline <GSK.L> and Whitbread <WTB.L> both fell
after going ex-dividend.
(Editing by David Hulmes)
