* FTSE 100 down 0.7 percent after 3 days of gains
* Banks retreat from recent gains on Austria fears
* Commodities head lower as dollar strengthens
* Defensive tobacco, beverage companies firmer
By David Brett
LONDON, Dec 15 (Reuters) - Britain's top shares fell 0.7
percent by midday on Tuesday as banks were hit by renewed
anxiety on the sector, while oils and miners fell as commodities
slipped on dollar strength.
By 1200 GMT the FTSE 100 <> was 37.39 points lower at
5,277.95 after having gained 1 percent in the previous session
to end at its highest level in over a week.
"There's some negative sentiment weighing on the banking
sector on fears that OeVAG (Austria's 4th largest bank) might
have to be nationalised, which adds to uncertainty following
Dubai," said Manoj Ladwa, senior trader at ETX Capital.
Oesterreicheische Volksbanken <OTVVp.VI>, Austria's top
cooperative bank, said reports in the Austrian press that the
financial market regulator had put it on a watchlist were
inaccurate. []
"Weak volumes and a rallying dollar are also encouraging a
pull-back in the market," Ladwa added.
Banks accounted for the most lost index points following
strong gains in the previous session.
Europe's largest bank HSBC <HSBA.L> was the sector's biggest
faller, down 2.2 percent, while Barclays <BARC.L> and Standard
Chartered <STAN.L> shed 2.2 and 1.9 respectively.
Royal Bank of Scotland <RBS.L> and Lloyds Banking Group
<LLOY.L> bucked the trend, gaining 0.9 percent and 0.5 percent
after RBS said there had been no threatened mass resignations of
the board, at any time, in relation to government threats to
curb bonuses at the state-backed institution.
Miners also took points off the board as gold fell 1 percent
and other metals retreated, pressured by a rise in the dollar
versus the euro, after lacklustre German economic data and on
concerns about euro zone banks.
Fresnillo <FRES.L>, Rio Tinto <RIO.L>, Randgold <RRS.L> and
Eurasian Natural Resources <ENRC.L> dropped 0.8 to 3.3 percent.
Investor sentiment weighed on energy stocks as crude <CLc1>
halted a nine-day slide ahead of data later on Tuesday. BP
<BP.L>, Royal Dutch Shell <RDSa.L>, Tullow Oil <TLW.L> and BP
<BP.L> fell 0.9 to 1.6 percent.
Among individual stocks, British Airways <BAY.L> was down
2.5 percent as a decision by the airline's crew to strike over
Christmas and concerns about a 3.7 billion pounds hole in its
pension scheme continued to hit sentiment in the stock.
INFLATION RISES
British consumer price inflation rose last month at its
fastest annual pace since May, propelled by fuel prices which
rose last month having fallen sharply in November last year.
[]
But there was no significant market reaction. "No one should
get carried away by the pickup in headline inflation -- it is
not a reason to start tightening monetary policy," Colin Ellis,
analyst at Daiwa Securities.
A basket of defensives were firmer as investors looked for
more risk-proof investments.
British American Tobacco <BATS.L> and Imperial Tobacco
<IMT.L> each added 0.2 percent. Wm Morrison <MRW.L> and J
Sainsbury <SBRY.L> were up 0.5 and 0.1 percent, while Severn
Trent <SVT.L> and United Utilities <UU.L> rose 1.1 and 1.5
percent respectively.
The UK blue-chip index is still up 19 percent this year,
having surged 53 percent since touching a six-year trough in
March, and some investors remained relatively upbeat about
prospects for the equity market.
Meanwhile the U.S. Federal Reserve starts its latest two-day
policy meeting on Tuesday and is likely to keep rates unchanged
at near zero. Eyes will be on the accompanying statement,
especially after upbeat U.S. sales and jobs data led markets to
price in the chance of a rate hike in the middle of 2010.
Also in the United States, November producer prices,
industrial production and the New York state manufacturing
activity data are all due at 1330 GMT.
Futures for the Dow Jones industrial average <DJc2>, the S&P
500 <SPc2> and the Nasdaq 100 <NDc2> were down 0.2 to 0.3.
(Editing by David Holmes)
