* FTSE 100 down 1.5 pct, touches three-year low
* UK jobless claims post biggest rise since 1992
* Banks the heaviest drag on the market
* Wolseley falls after weak results, outlook
By Dominic Lau
LONDON, July 16 (Reuters) - Britain's top share index fell
1.5 percent by midday on Wednesday, touching a three-year low,
as Royal Bank of Scotland <RBS.L> and HBOS <HBOS.L> led banks
lower on deepening concerns over the sector.
By 1022 GMT, the FTSE 100 <> was down 75.8 points at
5,096.1 after trading as much as 0.7 percent higher earlier in
the session. European shares also traded lower.
The UK benchmark index fell 2.4 percent on Tuesday to hit
its lowest close since October 2005. It has lost 21 percent so
far this year.
"People are looking ahead as to what writedowns they are
going to see from JPMorgan <JPM.N> and Citi <C.N> when they come
out in the next few days and so on. People are just generally
concerned," said Stephen Pope, chief global market strategist at
Cantor Fitzgerald Europe.
"Until they start to feel there is any stability in the
banking system and writedowns are being sufficiently announced,
then it is not going to have any confidence to move forward," he
said, adding that higher UK unemployment claims added to the
gloom.
Banks remained under pressure, with Royal Bank of Scotland
shares sagging 8.1 percent to a 10 year low as concerns deepened
about earnings for its big U.S. unit Citizens, revenues at its
enlarged investment bank arm and the potential that more capital
will be needed if it struggled to sell its insurance arm.
HBOS <HBOS.L>, Barclays <BARC.L>, Standard Chartered
<STAN.L>, Lloyds TSB <LLOY.L> and HSBC <HSBA.L> were down
between 1.5 and 8.5 percent.
On Tuesday, U.S. securities regulators issued an emergency
rule to limit certain types of short selling in major financial
firms, including Fannie Mae <FNM.N> and Freddie Mac <FRE.N>.
[]
Index heavyweight oil shares gave up early gains and turned
negative. BP <BP.L>, Royal Dutch Shell <RDSa.L>, gas producer BG
Group <BG.L>, Cairn Energy <CNE.L> and Tullow Oil <TLW.L>
slipped 0.9 to 1.6 percent.
Investors will look U.S. consumer prices data, due at 1230
GMT, for more clarity on the inflation picture in the world's
largest economy.
In Britain, the number of people out of work and claiming
benefits rose for a fifth month running in June and by the
largest amount since the slump of the early 1990s, in a sign the
economic slowdown is starting to bite.
GLOOMY WOLSELEY
Wolseley <WOS.L> dropped 7.2 percent after the building
materials distributor said trading profit for the last 11 months
was down 28 percent and market conditions were likely to
continue deteriorating. []
Admiral Group <ADML.L> rose 4.3 percent to top FTSE 100
gainers as UBS cited positive data from the AA on UK motor
insurance premium rates as a good reason to buy the car insurer.
ICAP <IAP.L> climbed 3.8 percent after the world's biggest
interdealer broker said group revenue grew by 15 percent in the
first quarter and it expected year profit to be broadly in line
with market expectations. []
London Stock Exchange <LSE.L>, British Land <BLND.L>,
FirstGroup <FGP.L> and Man Group <EMG.L> all fell after going
ex-dividend.
Credit Suisse, meanwhile, raised UK stocks to 5 percent
overweight from benchmark in its global portfolio, while
continental Europe was 30 percent underweight.
"The UK will have a recession but just 10 percent of the
stock market is accounted for by domestic cyclicals," the broker
said in a note. "Relative earnings momentum is second best of
all regions. UK equities tend to outperform 70 percent of the
time when global equities and lead indicators are weak."
(Additional reporting by Michael Taylor)
