* FTSE 100 down 1.7 pct
* Banks retreat
* Commodity stocks weak as metal, oil prices fall
By Tricia Wright
LONDON, May 11 (Reuters) - Britain's top share index was
lower around midday on Tuesday as enthusiasm over the euro
zone's $1 trillion rescue package wore off, and with lingering
political uncertainty weighing on sentiment.
By 1128 GMT, the FTSE 100 <> index was down 92.18
points, or 1.7 percent, at 5,295.24, pulling back after a 5.2
percent leap on Monday -- its biggest one-day percentage gain in
almost 18 months.
Banks, which saw stellar gains on Monday, retreated, taking
the most points off the blue chips. Barclays <BARC.L>, HSBC
<HSBA.L>, Lloyds Banking Group <LLOY.L> and Standard Chartered
<STAN.L> shed 2.7 to 4 percent.
Royal Bank of Scotland <RBS.L> saw the sharpest losses, down
5.3 percent, hit by a downgrade to "hold" from "buy" by Deutsche
Bank.
RBS was also pressured after ABN AMRO NV, now owned by the
British state-owned bank, agreed to forfeit $500 million to
settle charges it conspired to violate U.S. sanctions and bank
secrecy laws. []
Relief at the European Union's bold move to restore investor
confidence gave way on Tuesday to doubts about whether weaker
euro zone economies can meet their part of the bargain and
deliver drastic debt cuts. []
Britain's Liberal Democrats said talks to form a new
government had entered a decisive phase on Tuesday, after Labour
PM Gordon Brown's dramatic announcement he would step aside to
ease a centre-left coalition. []
"The developments politically could potentially undermine
the markets in the short term," said Tim Whitehead, portfolio
manager at Redmayne Bentley.
"The realisation that the euro package put together over the
weekend is not a panacea is beginning to dawn as well. And now,
potentially, China is perhaps looking to rein in growth even
further."
Miners were out of favour, hurt by heavy falls in metal
prices, and after Chinese inflation edged up to an 18-month high
in April, raising concerns about potential monetary tightening
measures. []
Xstrata <XTA.L>, Vedanta Resources <VED.L> and Kazakhmys
<KAZ.L> were the worst off, dropping 5.3 to 6.5 percent.
RANDGOLD SHINES
Randgold Resources <RRS.L> bucked the weak sector trend and
topped the FTSE 100 leader board, up 2.1 percent, reflecting a
stronger gold price as risk aversion returned to the market.
But energy companies were under pressure as crude <CLc1>
fell, with BG Group <BG.L>, BP <BP.L> and Royal Dutch Shell
<RDSa.L> down 0.7 to 2.2 percent.
Power firm National Grid <NG.L> rose 0.3 percent on the back
of its defensive qualities and a UBS upgrade to "buy" from
"neutral" ahead of its full-year results on May 20.
Cigarette maker Imperial Tobacco <IMT.L>, also wanted for
its defensive attractions, put on 0.6 percent.
British industrial output surged more than six times as fast
as expected in March to record its strongest monthly expansion
in almost eight years, official data showed. []
(Editing by Simon Jessop)
