* FTSE 100 falls 0.5 pct
* Banks top losers on writedown fears, U.S. sentiment
* Bank of England's inflation report boosts rate cut hopes
* Miners track metal prices higher
By Dominic Lau
LONDON, Aug 13 (Reuters) - Britain's FTSE 100 <> fell
by midday on Wednesday, led by banks on fears over writedowns in
the sector and retailers on weak growth outlook, though a Bank
of England report on inflation and firmer miners lent support.
By 1030 GMT, the UK benchmark was down 27.6 points, or 0.5
percent at 5,506.9, after ticking down 0.1 percent on Tuesday.
The index is down nearly 15 percent for the year.
Banks were the top losers on the index after U.S. bank
shares tumbled overnight on news that JPMorgan Chase <JPM.N> has
racked up $1.5 billion of losses so far this quarter on
mortgage-linked assets.
Barclays <BARC.L>, HSBC <HSBA.L>, Lloyds TSB <LLOY.L>, HBOS
<HBOS.L> and Standard Chartered <STAN.L> shed 1.2 to 4.5
percent. StanChart also traded ex-dividend.
Royal Bank of Scotland <RBS.L> dropped 4.2 percent after
Commonwealth Bank of Australia <CBA.AX> said it was pulling out
of talks with the British bank to buy ABN AMRO Australia.
But a consortium led by Goldman Sachs <GS.N> has agreed to
pay about $1.5 billion for a number of ABN AMRO's private equity
assets, the Wall Street Journal said.
British inflation, however, should fall below the central
bank's 2 percent target in two years if interest rates are held
at 5 percent, according to the Bank of England, prompting
markets to price in a rate cut by year-end. []
Sterling fell to a 21-month low versus the dollar while UK
rate futures soared.
"I don't think anything that the Bank of England has said is
particularly surprising," said Neil Parker, market strategist at
Royal Bank of Scotland, adding that the market was overreacting.
"If people are thinking the Bank of England is going to
reduce interest rates sooner on the back of this, maybe
accelerate a month or two, but they are warning that there are
upside inflation risk to the two-year horizon and they are not
taking any risk in interest rate policy if it endangers meeting
the inflation target."
Rising inflation and weak economic outlook also weighed on
retail and leisure stocks, with Enterprise Inns <ETI.L> slumping
9 percent, Marks & Spencer <MKS.L> losing 7.1 percent, Thomas
Cook <TCG.L> off 3.9 percent and Kingfisher <KGF.L> falling 6.4
percent.
The number of Britons claiming jobless benefits rose in July
by the largest amount since 1992 and average earnings in the
three months to June rose by the weakest amount in five years,
official data showed. []
SUPPORT FROM COMMODITIES
Miners offered some respite, helped by higher metal prices.
BHP Billiton <BLT.L>, Rio Tinto <RIO.L>, Anglo American
<AAL.L>, Xstrata <XTA.L> and Ferrexpo <FXPO.L> were up between
1.3 and 4.1 percent.
Firmer crude prices <CLc1> boosted Royal Dutch Shell
<RDSa.L>, BG Group <BG.L> and Tullow Oil <TLW.L>. BP <BP.L>,
however, fell after going ex-dividend.
Hammerson <HMOS.L>, Prudential <PRU.L>, RSA Insurance
<RSA.L>, Standard Life <SL.L> also fell after trading without
the rights of dividend.
British Energy <BGY.L> added 0.9 percent after the nuclear
operator said lower output following nuclear power station
outages cut its first quarter profit in half, but the results
were still a lot better than some analysts had expected.
Among mid-caps, Russian oil producer Imperial Energy
<IEC.L>, which is in the sights of China's Sinopec Group and
India's ONGC <ONGC.BO>, could be sold within days, a source
familiar with the situation said. []
Imperial Energy strengthened 5.8 percent.
(Additional reporting by Michael Taylor; editing by Elaine
Hardcastle)
