By Rebekah Curtis
LONDON, Jan 31 (Reuters) - Britain's FTSE 100 <> share
index tumbled 1.4 percent at midday on Thursday as U.S.
recession fears undermined banks and the index headed for its
worst ever January.
By 1221 GMT the FTSE 100 was down 84.1 points at 5,753.2 as
shares slid across Europe. The UK benchmark index has shed about
11 percent so far in 2008 as persistent recession concerns have
triggered global stock market ructions.
Bank shares stole 40 points off the FTSE on concerns that
deepening problems for U.S. bond insurers could increase
write-downs on troubled assets and deepening U.S. recessionary
fears.
Barclays <BARC.L> fell more than 6 percent, Royal Bank of
Scotland <RBS.L> shed 4.5 percent, HSBC <HSBA.L> dropped 2.5
percent, Standard Chartered <STAN.L> went down 3.6 percent and
Bradford & Bingley <BB.L> lost more than 6 percent.
A negative note from Panmure, including "sell" ratings on
the all the above banks, added to the gloom.
"It's the same thing that we've had since the beginning of
the year," said Chris Iggo, strategist at Axa Investments.
"We need some interest rat cuts in the UK otherwise the bank
sector is still going to struggle," he added.
"The Fed's doing its best to head off recession but the
central banks in Europe haven't really got in the game yet and I
think that is necessary before the FTSE can really stabilise."
The Bank of England is expected to cut interest rates next
week in February to head off fears of slowing growth despite
only a one-in-four chance of a recession, and end the year with
rates at 4.75 percent, a Reuters poll showed last week.
U.S. stocks fell on Wednesday as speculation on CNBC
television that credit rating firms would downgrade top bond
insurers Ambac Financial Group <ABK.N> and MBIA <MBI.N> pushed
shares in both companies down more than 10 percent,
overshadowing a 50 basis-point cut in interest rates by the
Federal Reserve.
With the long-mooted U.S. rate cut out of the way, investors
eyeing U.S. data will now pin their focus on key jobs data due
on Friday.
UNWANTED FRIENDS
Friends Provident <FP.L> was the standout mover in early
trade, plunging 11.6 percent after saying it plans to sell fund
manager F&C <FCAM.L> and high-end unit Lombard and cut 600 jobs
in a radical overhaul to streamline the business, improve cash
flow and boost profits.
Aberdeen Asset Management <ADN.L> said on Thursday it was
still not interested in buying rival F&C, which dropped 1.7
percent.
Miners staged a mixed performance, nagged by global growth
concerns but cheered by merger-and-acquisition hopes.
Rio Tinto <RIO.L> put on 1.3 percent on bets its rival BHP
Billiton Ltd <BLT.L>, up 1.2 percent, was poised to launch a
lightly sweeter offer than it proposed last November. See:
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British natural gas company BG Group <BG.L> added 2.2
percent on the back of record profits for Royal Dutch Shell
<RDSa.L> and news of increased gas production at its
Karachaganak oilfield in Kazakhstan.
Shell's own shares dropped 1.8 percent after it announced
its oil reserve additions halved to 1 billion barrels in 2007
compared to the previous year, and despite the firm posting
record European company earnings of $27.6 billion.
Adding some pressure onto the sector, U.S. crude oil prices
fell more than one percent, pressured by concerns over troubles
in the financial sector despite another cut in U.S. interest
rates, while rising fuel inventories in the top energy consumer
also weighed.
Drugmaker Shire <SHP.L> shed 2.2 percent after Credit Suisse
cut the stock's price target to 930 pence from 1,130 pence,
keeping a "neutral" rating.
(Editing by Quentin Bryar/Elaine Hardcastle)
