* Lloyds leads banking shares lower, insurers slide
* Commodity stocks fall on weaker crude prices, Xstrata up
* Drugmakers down after Obama's budget proposal
By Simon Falush
LONDON, Feb 27 (Reuters) - Britain's top share index slid 2
percent by midday on Friday as Lloyds Banking Group tumbled,
dragging embattled banks lower while drugmakers fell after U.S.
budget proposals and softer crude prices hit oil stocks.
By 1145 GMT, the FTSE 100 <> was down 76.68 points at
3,838.96, after gaining 1.7 percent on Thursday. Britain's
benchmark index is down 7.6 percent so far this month and has
lost 13.5 percent in 2009 after tumbling 31 percent last year.
Banks were the heaviest losers, retreating from sharp gains
the previous session as uncertainty about their futures again
bubbled to the surface again.
Lloyds Banking Group <LLOY.L> tumbled 21 percent after it
said it had not yet finalised details of its plan to put
billions of pounds of assets into a British government-backed
insurance scheme as it unveiled a 10 billion pound loss for
2008. []
"There's a feeling that the banks might need yet more
capital, and nationalisation is back on the agenda both here and
in the U.S. It looks as if there's no end in sight," said Graham
Exton, fund manager at Tilney Investment Management in
Liverpool.
Royal Bank of Scotland <RBS.L> fell 13.1 percent while
Barclays <BARC.L>, HSBC <HSBA.L> and Standard Chartered <STAN.L>
dropped between 1.7 percent and 10.6 percent.
Insurers, whose fortunes tend to correlate closely with
banks also slid with Legal & General <LGEN.L>, Aviva <AV.L> and
Old Mutual <OML.L> down 6.9 to 7.6 percent.
The U.S. government and Citigroup <C.N> have reached a deal
in which Washington would substantially raise its stake in the
bank, a person familiar with the transaction said, offering hope
of greater stability for the financial system. []
Also, global development banks launched a coordinated
two-year plan to lend up to 25 billion euros ($32 billion) to
shore up banks and business in crisis-hit eastern and central
Europe. []
In Britain, a survey showed consumer morale was less
negative than expected this month but remained in the doldrums
as people fretted about the economic climate.
MORE DIRE DATA
House prices in England and Wales fell 15.1 percent on the
year in January, the Land Registry said, underlining gloom in
the UK property market.
The global economic picture also looked grim. Production at
Japanese factories fell by a record 10 percent last month and
jobs proved increasingly hard to find, showing that Japan's
worst recession since World War Two is deepening. []
Drugmakers followed U.S. peers lower on worries that
President Barack Obama's budget proposals targeting high drug
prices in the United States will strangle their profits.
[]
AstraZeneca <AZN.L> sagged 6.5 percent, GlaxoSmithKline
<GSK.L> lost 3.8 percent and Shire <SHP.L> slipped 3.3 percent.
However, other stocks seen as resilient to poor economic
conditions performed well, with Imperial Tobacco <IMT.L> and
British American Tobacco <BATS.L> up 2.1 percent and 1.4
percent, respectively.
(For ANALYSIS on smoking in the recession, click on
[])
Heavyweight oil and gas producers fell along with the softer
crude price <CLc1>. BP <BP.L>, Royal Dutch Shell <RDSa.L>, BG
Group <BG.L>, Cairn Energy <CNE.L> and Tullow Oil <TLW.L> slid
between 0.8 and 2.1 percent.
Miners also tracked softer metal prices, with BHP Billiton
<BLT.L>, Rio Tinto <RIO.L>, Vedanta Resources <VED.L>, Kazakhmys
<KAZ.L> and Antofagasta <ANTO.L> down 1.2 to 4.4 percent.
However Xstrata <XTA.L> bucked the trend, gaining 3.1
percent after Exane BNP Paribas upgraded the miner to
"outperform" from "neutral".
Services firm Serco Group <SRP.L> sank 4.9 percent despite
saying pretax profit rose 19 percent in 2008 to 136 million
pounds ($194 million) and reiterating its guidance.
Investors will look to U.S. gross domestic prodcut (GDP)
data, due to be released at 1330 GMT, for more evidence of the
extent of the global recession.
(Additional reporting by Dominic Lau; editing by Karen Foster)
