* FTSE 100 down 2.1 pct, six gainers on the index
* Banks, commodity shares the standout losers
* M&S rebounds on market talk of bid interest
By Dominic Lau
LONDON, July 8 (Reuters) - Britain's top share index was
down 2.4 percent by midday on Tuesday, tracking sharp losses in
the United States and Asia on concerns that financial companies
would unveil more writedowns and need to raise more capital.
By 1033 GMT, the FTSE 100 <> was down 117.5 points at
5,395.8 after gaining 1.9 percent on Monday. The UK benchmark
index has fallen 16.5 percent this year.
"When there is battle on the street and murder on the
dancefloor, you've got to start buying. The market is probably
going to start a bounce from here," said Manoj Ladwa, a senior
trader at TradIndex.
"We have been down to these levels before in the last six
months and bounced off, although we are not poised for a major
rally from here."
European shares were also down sharply.
Banks were among the standout losers on the FTSE 100
following fresh concern the top two U.S. mortgage providers
would have to raise even more capital.
Barclays <BARC.L>, Royal Bank of Scotland <RBS.L>, HSBC
<HSBA.L>, HBOS <HBOS.L>, Lloyds TSB <LLOY.L>, Alliance &
Leicester <ALLL.L> shed between 2.6 and 8.9 percent. Bradford &
Bingley <BB.L> lost nearly 20 percent.
Within the financial sector, London Stock Exchange <LSE.L>
topped the losers' list, down 8.6 percent as investors pointed
to persistent concerns over new equity exchange competitors and
greater price competition.
U.S. stocks fell on Monday after Lehman Brothers estimated
that a proposed accounting rule would force Fannie Mae <FNM.N>
and Freddie Mac <FRE.N> to raise as much as $75 billion between
them, while big energy companies fell along with oil prices
<CLc1>. In Asia, Japan's Nikkei <> shed 2.5 percent.
Marks & Spencer <MKS.L> recovered earlier losses to be up
1.3 percent as traders cited market talk of possible bid
interest in the retailer.
However, the retail sector was weak, with Kingfisher <KGF.L>
down 5.5 percent, Sainsbury <SBRY.L> off 3.9 percent and Next
<NXT.L> losing 1.3 percent.
Oil shares fell sharply after crude prices <CLc1> lost
nearly $4 in the previous day. BP <BP.L> lost 2.7 percent, Royal
Dutch Shell <RDSa.L> dropped 2.4 percent and gas producer BG
Group <BG.L> slipped 2.6 percent.
Miners also took a battering, with BHP Billiton <BLT.L>, Rio
Tinto <RIO.L>, Anglo American <AAL.L>, Xstrata <XTA.L>, Vedanta
Resources <VED.L>, Lonmin <LMI.L>, Ferrexpo <FXPO.L> and
Eurasian Natural Resources <ENRC.L> losing 2.7 to 4.9 percent.
ON A TIGHTROPE
"If we fall further and close below (the intraday low of
5,338.7 on Jan. 22), then it's going to be a psychological blow
to the market because to find a time we have been lower on the
FTSE 100 you have to go back to 2005," said Tim Hughes, head of
sales trading at IG Index.
"In terms of 'are we in a bear market?' It looks as likely
now as ever and I think it will look even more gloomy and bleak
in terms of prospectives going forward, if we break the 5,340
mark today."
Investors will keep an eye on U.S. Federal Reserve Chairman
Ben Bernanke's comments when he speaks at a conference at 1200
GMT, and U.S. home sales and wholesale inventory data due at
1400 GMT.
GlaxoSmithKline <GSK.L>, Drax <DRX.L> and Petrofac <PFC.L>
were the other gainers on the index.
Housebuilder Persimmon <PSN.L>, which is listed on the
mid-cap FTSE 250 <>, fell 3.1 percent after it said the
market remained difficult but it did not expect a significant
writedown on the value of its land holdings when it reports
first-half results in August.
Peers Taylor Wimpey <TW.L>, Barratt Developments <BDEV.L>,
Bovis Homes <BVS.L>, Bellway <BWY.L> and Redrow <RDW.L> were
down 1.1 to 8.3 percent.
Within the real estate sector, Savills <SVS.L> lost 6.4
percent after the property services group said predicting its
full-year performance has become "very difficult" as a result of
a sharp downturn in property sales in its UK and U.S. markets.
(Additional reporting by Michael Taylor; editing by Sue Thomas)
