*Housebuilders slide as rate cut hopes evaporate
*Sainsbury falls after results
*Oils track weaker crude
*Banks retreat from this week's gains
By Simon Falush
LONDON, June 18 (Reuters) - Britain's leading share index
fell 1.5 percent by midday on Wednesday as inflation concerns
caused sentiment on housebuilders to crumble and soft results
from Sainsbury <SBRY.L> highlighted headwinds facing the UK.
By 1020 GMT, the FTSE 100 <> was down 84.8 points at
5777.1, after rising 1.2 percent on Tuesday.
Housebuilder Persimmon <PSN.L> was the top loser on the FTSE
100, down 6.5 percent while FTSE 250 <>-listed Redrow
<RDW.L> slipped 12.3 percent after UBS cut its price target to
169 pence from 208 pence.
Continuing concerns about the housing market were
exacerbated by data on Tuesday showing consumer prices rising at
their fastest in 10 years.
"There's concern about downward pressure on economic
growth... and the prospects for housebuilders are discouraging
with (UK) rates not going down in the foreseeable future,
worries about falling house prices, and misery on the trading
outlook," said Andrew Bell, head of research at Rensburg
Sheppards.
Deteriorating sentiment on the housing market also knocked
property company Land Securities <LAND.L> down 3.5 percent. The
firm also traded without the rights of dividend this session.
Sainsbury shares slid 2.2 percent after the UK's third
largest supermarket group posted first-quarter underlying sales
towards the bottom of analysts' forecasts but said full-year
expectations remained unchanged [].
Tesco <TSCO.L> fell 2.1 percent and Morrison Supermarkets
<MRW.L> slipped 1.5 percent.
"Sainsbury's update shows how competitive the environment is
out there, with consumers having less money in their pockets due
to higher mortgage payments, higher taxes and higher prices at
the pump," said Barclays strategist Henk Potts.
Also underlining gloom on the retail sector was British
sweets-to-DVDs retailer Woolworths Group Plc <WLW.L>. It posted
weaker sales in the first 19 weeks of its financial year and
said Chief Executive Trevor Bish-Jones was to step down.
Woolworths stock dropped 6.2 percent.
SLIPPERY OILS
Oil shares were the biggest drag on the index, tracking
weaker crude prices <CLc1>. BP <BP.L> was down 1.9 percent,
Royal Dutch Shell <RDSa.L> lost 2 percent and gas producer BG
Group <BG.L> eased 2.2 percent.
Minutes from the Bank of England's monetary policy committee
meeting released earlier showed an 8-1 vote in favour of keeping
rates on hold at 5 percent.
The central bank's dilemma was thrown into sharp relief on
Tuesday as UK consumer price inflation rose to an annualised 3.3
percent -- well above the 2 percent target.
This made the prospect of rate cuts from the Bank of
England, which would ease retailers' plight, even more remote.
In the euro zone, European Central Bank Governing Council
member Yves Mersch said there is a "possible certainty" of an
ECB interest rate rise at the bank's July 3 meeting, but he
played down the possibility of a series of hikes.
[]
Morgan Stanley's <MS.N> results due later in the day will
also provide further clarity on the strength of U.S. investment
banks amid a global credit crisis.
3i Group <III.L> and Severn Trent <SVT.L> also fell after
going ex-dividend.
Banks retreated from this week's sharp gains. Barclays
<BARC.L>, Royal Bank of Scotland <RBS.L>, HBOS <HBOS.L>, Lloyds
TSB <LLOY.L> and Alliance & Leicester <ALLL.L> all declined.
(Additional reporting by Sitaraman Shankar; Editing by David
Cowell)
