* Oils, miners fall with weak commodity prices
* Banks under pressure on continuing break-up fears
* Drugmakers cautious ahead of results
By Jon Hopkins
LONDON, Oct 28 (Reuters) - Britain's leading shares were 1.8
percent lower around midday on Wednesday, with falls by
heavyweight oils, miners and banks dragging the FTSE 100 <>
index to a three-week low.
At 1142 GMT the benchmark index was down 93.39 points at
5,107.58, on track for the biggest daily percentage fall since
the start of September and, with three sessions to go, the first
monthly decline since June.
"For the moment financial markets have clearly stagnated,
with a realisation hitting home that all the warnings of a
return to growth being a long and painfully slow process are not
just hot air," said David Jones, Chief Market Strategist at IG
Index.
"There is a growing sense that the comeback has been too
much, and the question is whether the FTSE can now hold steady
amid the current negativity," Jones added.
Miners took the most points off the index, reflecting lower
metal prices as doubts over the demand outlook resurfaced.
Xstrata <XTA.L> was the top FTSE 100 faller, down 6.7
percent, while Kazakhmys <KAZ.L>, Lonmin <LMI.L>, Rio Tinto
<RIO.L>, BHP Billiton <BLT.L> shed 3.4 to 6.1 percent.
Vedanta Resources <VED.L> lost 4.5 percent, with the extra
hit of a Barclays Capital downgrade to "equal weight".
Energy stocks fell, having rallied strongly on Tuesday on
the back of BP's <BP.L> good numbers, as crude <CLc1> prices
fell below $79 a barrel.
BG Group <BG.L> fared worst among the oil majors, down 2.7
percent, after posting a 44 percent drop in third-quarter net
profit to 484 million pounds as gas and oil prices plummeted,
though its underlying profits beat forecasts. []
Broker downgrades put pressure on BP, off 1.6 percent, with
Citigroup cutting its rating for the oil major to "hold" from
"buy" on its judgement that the firm's operational recovery is
peaking.
Royal Dutch Shell <RDSa.L> lost 1.5 percent, and oil
explorers Tullow Oil <TLW.L> and Cairn Energy <CNE.L> shed 3 and
3.3 percent.
The banking sector extended its decline, with the break-up
of Dutch financial services group ING <ING.AS> continuing to
weigh heavily on its UK peers.
Investors are unsettled by mounting fears over the disposals
government-backed banks will have to make in order to satisfy
the European Commission.
Royal Bank of Scotland <RBS.L>, Lloyds Banking Group
<LLOY.L>, Barclays <BARC.L>, Standard Chartered <STAN.L>, and
HSBC <HSBA.L> fell between 1 and 3.9 percent.
Lloyds Banking Group, Royal Bank of Scotland and Northern
Rock will be broken up and parts of their businesses sold off to
create three new banks, the Independent newspaper said, quoting
government sources.
Investors were also uneasy as they awaited further
developments on regulatory change following moves across the
Atlantic. []
Life insurers were also weak, with Prudential <PRU.L>, Legal
& General <LGEN.L>, Old Mutual <OML.L> and Standard Life <SL.L>
down 2.2 to 6.05 percent.
Prudential posted a better than expected 9 percent drop in
third-quarter sales on Wednesday, as its Asian region and U.S.
businesses offset weakness at home. []
DRUGS AWAITED
Drugmakers were weak, reversing earlier gains awaiting
results in the sector.
GlaxoSmithKline <GSK.L> shed 1.1 percent ahead of its
third-quarter results at 1200 GMT, AstraZeneca <AZN.L> lost 1.9
percent, and Shire <SHP.L>, which reports on Friday, was flat,
having given up earlier gains.
Telecoms were the biggest sectoral gainers, with mobile
heavyweight Vodafone <VOD.L> up 0.7 percent, and fixed-line peer
BT Group <BT.L> ahead 0.4 percent as Barclays Capital initiated
coverage on the European sector with a positive view.
U.S. stock index futures fell on Wednesday, with more
company results and durable goods and housing sales figures due
as investors seek insight into the health of the economy a day
after disappointing consumer confidence data. []
(Reporting by Jon Hopkins, editing by Will Waterman)
