* FTSE 100 drops 0.6 pct, hovers near 5-month lows
* Miners slip, tracking weaker metals prices
* ECB rate decision, U.S. jobs data awaited
By Atul Prakash
LONDON, July 3 (Reuters) - Britain's blue-chip index touched
a five-month low on Thursday, as mining stocks slipped tracking
softer metals prices and an uncertain economic outlook continued
to hit the banking sector.
By 1024 GMT, the commodity-heavy FTSE 100 <> was down
32.5 points, or 0.6 percent, at 5,392, after falling to a low of
5,358.5 points. It lost 1 percent in the previous session.
Investors awaited the release of U.S. non-farm payrolls data
later in the day for near-term market direction, with economists
expecting a loss of 60,000 jobs, against 49,000 job losses in
the previous month.
The market will also keep a close eye on the European
Central Bank's rate decision, due at 1145 GMT. The central bank
is expected to raise interest rates to 4.25 percent from 4
percent to curb inflation, analysts said.
Data showed this week that euro zone inflation jumped to a
record 4.0 percent year-on-year in June, more than double the
European Central Bank's target of just under 2 percent.
"Many of our clients have been cashing in on the possibility
that there could be further falls within the equity markets and
have been building short positions primarily on the large cap
mining companies," said Andrew Turnbull, director at Blue Index
CFDs.
"With the clear downward trend in the equity markets, we
will continue to maintain our negative stance on housebuilders,
pub companies and the banking sector," he added.
Lloyds TSB <LLOY.L>, Standard Chartered <STAN.L> and HSBC
<HSBA.L> fell between 0.9 and 1.9 percent, but HBOS <HBOS.L>
gained 2.7 percent.
BANKING SECTOR WOE
Analysts remained worried about further writedowns and
losses in the banking sector. Worries about slow economic growth
and rising inflation also continued to sweep across financial
markets.
The credit squeeze for households and businesses looked set
to intensify over the coming months as lenders braced for rising
defaults amid a deteriorating economic outlook, a survey by the
Bank of England showed. []
British data showed the UK services sector shrank at its
fastest pace since the aftermath of the September 11 attacks on
the United States in 2001.
"It's just really bad sentiment at the moment, which is
driving the market lower. There is a bit of nervousness over the
data that is due out today," said Angus Campbell, head of sales
at Capital Spreads.
"Inflation is affecting the consumers. They are struggling."
Inflation concerns intensified, with crude prices hitting
new record highs above $145 a barrel following a
higher-than-expected fall in U.S. crude stocks.
But despite strong crude prices, oil stocks slipped,
tracking broader market declines. BP <BP.L>, gas producer BG
Group <BG.L> and Tullow Oil <TLW.L> shed between 1.1 and 2.4
percent.
Miners also fell as metals prices weakened. Anglo American
<AAL.L> fell 0.8 percent, Vedanta Resources <VED.L> was down 0.1
percent and Xstrata <XTA.L> fell 1.8 percent.
Miner BHP Billiton <BLT.L> said that United States antitrust
authorities had cleared its unsolicited $170 billion bid for
rival miner Rio Tinto <RIO.AX><RIO.L>. [] But
shares of both the companies were down about 2 percent, tracking
the market trend.
Carphone Warehouse <CPW.L> slipped 4.3 percent after Merrill
Lynch removed Europe's biggest independent mobile retailer from
its telecoms preferred list, traders said. Carphone shares have
fallen almost 50 percent in 2008.
(Editing by Elaine Hardcastle)
