* FTSE 100 slides 1.8 pct, touches six yr low
* Banks hit as govt ups Lloyds stake; HSBC tumbles
* Energy and pharma stocks gain
By Martina Fuchs
LONDON, March 9 (Reuters) - Britain's FTSE 100 <>
dropped 1.8 percent to a six-year low by midday Monday as bank
stocks tumbled on investor concern about the fragile financial
sector, outweighing gains in energy and pharmaceuticals.
By 1120 GMT, the FTSE 100 <> was down 63.80 points at
3,466.93 points, after touching its lowest point in six years.
The index had risen 0.87 points on Friday.
Banks were the biggest losers in Britain's top share index,
as investors continued to flee the financial sector following
news of further government stake-building.
Lloyds Banking Group <LLOY.L> shares tumbled 8.3 percent as
the bank starts meeting investors to garner support to insure
260 billion pounds ($370 billion) of risky assets with the
British government, which will get a stake of up to 77 percent
in the bank. []
Analysts said the financial sector is also being pressured
by the worsening economic climate.
"As we move through the recession to more traditional bad
loan impairments coming through, the Lloyds story has been
rather a knock-back for the banking sector," said Richard
Hunter, head of UK equities at Hargreaves Landsdown.
Lloyds said Britain's requirement for banks to hold enough
capital to withstand a "severe" downturn was key to its
decision, raising alarm about more stringent requirements being
imposed, which was seen as negative for Barclays <BARC.L>.
Barclays was the biggest faller on the blue-chip index, down
10.7 percent.
HSBC <HSBA.L> shares fell 9.9 percent, after short sellers
dumped the stock in anticipation of buying back after brokers
said the bank could complete its $17.7 billion rights issue.
[]
Other banks were also down, with Royal Bank of Scotland
<RBS.L> falling 9.0 percent, while Barclays <BARC.L> and
Standard Chartered <STAN.L> lost 8.6 and 8.4 percent
respectively.
The UK banking index <.FTNMX8350> is down 8 percent and has
tumbled almost 50 percent this year after slumping by 57 percent
in 2008.
Bank of England Deputy Governor Charles Bean said the
central bank has scope to pump more money into the economy if an
asset-buying spree unveiled last week failed to kickstart
Britain's recession-hit economy. []
The Bank of England cut interest rates to a historic low of
0.5 percent last week and admitted it had pushed conventional
monetary policy to its limit.
Meanwhile, the White House's chief economic adviser Larry
Summers said world leaders need to pump more money into the
economy in a coordinated effort to boost demand and pull the
world out of recession. []
Oil and gas producers added the most points to the index,
supported by crude prices gaining ground <CLc1> and pushing
above $46 a barrel.
Tullow Oil <TLW.L> added 5.9 percent after it said it had
made a significant new discovery offshore Ghana and secured a $2
billion loans package to develop the finds. []
Heavyweights Royal Dutch Shell <RDSa.L> and BP <BP.L> also
gained ground.
Defensive pharmaceuticals stocks were also in positive
territory as investors looked to assets perceived as relatively
safe amid the gloomy economic outlook.
AstraZeneca <AZN.L> added 4.7 percent after news of a
planned Merck <MRK.N> and Schering-Plough <SGP.F> deal, while
Shire <SHP.L> and GlaxoSmithKline <GSK.L> gained 2.8 and 0.7
percent respectively.
However, miners were a standout faller on the UK index as
the falling copper price hit miners <MCU3=LX>.
Vedanta Res <VED.L>, Anglo American <AAL.L> and Xstrata
<XTA.L> fell between 3.7 and 4.4 percent.
(Editing by Sharon Lindores)
