FTSE flat as HSBC results drag banks; oils positive

                                
 * FTSE 100 down 0.1 pct 
                                
 * HSBC turns negative after H1 results
                                
 * Heavyweight oil shares follow rising crude prices
                                
 * Interest rates verdicts due later this week
                                
 By Michael Taylor
                                
 LONDON, Aug 4 (Reuters) - Britain's benchmark stock index
reversed earlier gains to trade flat on Monday, as oil shares
tracked rising energy prices, while Europe's biggest bank HSBC
<HSBA.L> dragged after its first-half results.
                                
 At 1059 GMT the FTSE 100 <.FTSE> was down 1.8 points, or 0.1
percent at 5,352.9. The blue-chip index lost 1.1 percent on
Friday and is now over 17 percent lower this year.
                                
 HSBC added more than 1 percent before falling 2.3 percent
after it said its first-half profit fell 28 percent, in line
with forecasts, as a $14 billion hit on bad debts on U.S. home
loans and asset writedowns offset strong Asian growth.
                                
 The bank also said it was still too soon to say whether bad
U.S. housing debts had peaked in the first half of the year,
despite a slower rate of deterioration. See [ID:nWLA7530] and
[ID:nL487970]
                                
 Other banking stocks to fall included HBOS <HBOS.L>, Lloyds
TSB <LLOY.L> and Royal Bank of Scotland <RBS.L>.
                                
 In commodities, oil shares benefitted from steady U.S. crude
prices <CLc1> and merger activity. BP <BP.L>, Tullow Oil <TLW.L>
and BG Group <BG.L> tacked on 1.2-1.5 percent.
                                
 Royal Dutch Shell <RDSa.L> rose 1.7 percent after the Sunday
Times said it had held talks with AIM-listed oil firm Sibir
Energy <SBE.L> about a 1 billion pound ($1.98 billion) asset
swap deal. [ID:nL3241446]
                                
 "Bit surprised we've had such a decent start to the day,"
said Peter Dixon, UK economist at Commerzbank. "What is clear,
if you look at trading volumes, there has been a significant
tailing off and I'd suspect the moves we're seeing are being
exaggerated by thin trading."
                                
 "Markets have a bit more correction to go -- maybe not a
huge amount -- if you said to me markets down another 5 percent
from here, I'd certainly go along with that," he added.
                                
 Volume on the FTSE was equal to about 20 percent of the
full-day 30 day average.
                                
 Russia-focused oil company Imperial Energy <IEC.L>, already
discussing a 1.3 billion pound takeover, advanced 8.2 percent
after it said it was in talks with a second unnamed suitor.
                                
 Earlier British media said China Petroleum & Chemical Corp,
the Chinese state-owned company better known as Sinopec
<0386.HK>, had launched a bid for Imperial. [ID:nL4715416]
                                
 
                                
 RATE VERDICT BONANZA
                                
 On the economic calendar, U.S. personal consumption
expenditure data, which contains the core PCE reading -- the
Federal Reserve's preferred measure of inflation -- is due at
1230 GMT.
                                
 But the big economic risk events this week will be the rate
decisions of the Federal Reserve, the Bank of England and the
European Central Bank. Analysts expect all three to stay on
hold.
                                
 "Interest rates very important this week," said Angus
Campbell, head of sales at Capital Spreads. 
                                
 "Their remit is to tackle inflation and not really to look
after the economy as such as a first port of call -- it seems
that the remit is shifting somewhat and there is external
pressure being placed on them in order to keep the economy
afloat."
                                
 In other M&A activity, Punch Taverns <PUB.L> gained 5.8
percent after buyout group CVC Capital Partners weighed up a bid
approach to the pubs operator, the Daily Mail reported.
                                
 Both Punch and CVC declined to comment.
                                
 Related companies to climb included SABMiller <SAB.L> and
Whitbread <WTB.L>.
                                
 Centrica <CNA.L> added 1.2 percent on media reports that it
may revive plans for a 22.5 billion pound ($44.47 billion)
merger with British Energy <BGY.L> after French group EDF's
<EDF.PA> takeover of the nuclear operator stalled on Friday.
                                
 British Energy was up 1.9 percent.
                                
 Metal prices drifted lower to weigh on other mining shares,
with ENRC <ENRC.L>, Kazakhmys <KAZ.L> and Vedanta <VED.L> down
between 4.2 and 4.6 percent.
                                
 Anglo American <AAL.L> shed 3.3 percent after Goldman Sachs
cut its price target on the stock to 4,280 pence from 4,495
pence.
                                
 "This week marks the first anniversary of the credit crunch
as it was on Aug 9, 2007 that the true horror of the credit
crisis hit home," said David Scott, senior stockbroker at
Redmayne-Bentley Stockbrokers in a note on the markets.
                                
 "Early proclamations from bankers and politicians that it
would be over within a few months appear to be very reminiscent
of comments made ahead of the First World War which, of course,
lasted for many years."
                                
 (Additional reporting by Dominic Lau; Editing by Victoria
Main)