* FTSE 100 down 1.2 pct, retailers down
* Bruised banks continue slide after Lehman
* Morrison falls despite results, Cazenove downbeat
* Brazil oil find buoys BG Group
By Michael Taylor
LONDON, Sept 11 (Reuters) - Britain's benchmark share index
extended losses to fall 1.2 percent by midday on Thursday as
Morrison Supermarkets <MRW.L> fell after half-year results and
the decline in banks persisted, though BG Group <BG.L> rose.
At 1029 GMT the FTSE 100 <> was down 62.5 points at
5,303.7 and is now almost 6 percent lower for the month.
Investors remained cautious over any further fallout in the
financial sector after U.S. investment bank Lehman Brothers
<LEH.N> on Wednesday posted a larger-than-expected third-quarter
loss of $5.92 per share and slashed its annual dividend.
UK banks Barclays <BARC.L>, Lloyds TSB <LLOY.L>, Royal Bank
of Scotland <RBS.L> and HBOS <HBOS.L> lost 2.8-4.8 percent.
"Scientists failed to end the world yesterday and Lehman
Brothers failed to cause financial market meltdown despite
announcing worse-than-expected numbers," said Ian Griffiths a
dealer at CMC Markets.
Morrison Supermarkets featured among the leading losers on
Britain's blue-chip index, down 6.3 percent after the
supermarket group's in-line first-half results failed to
inspire. []
Cazenove said, "There is not obviously an upgrade in these
numbers and the relatively muted operational gearing despite
very strong top line performance does suggest that the
trajectory of margin progression is becoming much flatter."
Among midcaps, Home Retail <HOME.L> lost 6.4 percent after
worse-than-expected second-quarter results at both its
businesses, Argos and Homebase. []
Kingfisher <KGF.L> slipped 6.8 percent with Bernstein
cutting its rating to "market perform" from "outperform".
Adding to the retail gloom, British department stores and
supermarkets group John Lewis [] posted a 27 percent drop
in first-half profit and said it was cautious about the outlook
for the rest of this year and 2009. []
"Retailers are being sold off aggressively once more, with
the global slowdown and inflation worries remaining underlying
issues," said Ben Timms, senior trader at Blue Index.
On the economic front, Britons' expectations of inflation
over the next 12 months edged up to a series high of 4.4 percent
in August from 4.3 percent in May, a Bank of England survey
showed on Thursday. []
And equities aside, sterling hit a 2-1/2 year low versus the
dollar after BoE policymaker David Blanchflower said there would
be a deeper than forecast decline in the British economy and
front-loaded rises in unemployment.
BG GROUP BRAZIL FIND
BG Group <BG.L> tacked on 4 percent after oil and gas
producer said that after drilling at the Iara oil field in
Brazil it now estimated the field could contain 3-4 billion
barrels of recoverable reserves, confirming earlier comments by
project partner Petrobras <PETR4.SA>.
Traders also cited underlying speculative interest helping
BG Group following its decision to abandon a takeover bid for
Origin Energy of Australia <ORG.AX>.
In other commodity shares, miner Ferrexpo <FXPO.L> added 2.9
percent, shrugging off confirmation that the stock will be
demoted from the FTSE 100 index after the latest reshuffle
having been in the index for just one quarter.
Eurasian Natural Resources <ENRC.L>, Xstrata <XTA.L>,
Kazakhmys <KAZ.L> and Antofagasta <ANTO.L> were also all up
between 1.7 and 4.4 percent.
ITV <ITV.L> advanced 3.5 percent, extending this week's
rally to above 19 percent as takeover hopes continued to swirl
around the broadcaster.
Recent talk has highlighted Italy's Mediaset <MS.MI> as a
potential bidder for ITV, and news on Wednesday that Charles
Allen, the UK broadcaster's former boss is joining a private
equity group also added to the takeover speculation.
(Additional reporting by Simon Falush and Jon Hopkins)
