Commodities, banks drag FTSE down 1.5% by midday

                                
 By Dominic Lau
                                
 LONDON, June 4 (Reuters) - Britain's blue chip index slid
1.5 percent by midday on Wednesday as a firmer dollar weighed on
commodity prices, hitting miners and oil shares, while banks
took a beating on fresh funding concerns.
                                
 By 1012 GMT, the FTSE 100 <.FTSE> was down 91.6 points at
5,966.1, losing its grip on the key 6,000 mark and tracking
weakness in U.S. stocks overnight amid signals from the Federal
Reserve that it would be reluctant to cut interest rates again
because of dollar-led inflation.
                                
 The unusually explicit warning from Fed Chairman Ben
Bernanke sent the dollar higher against other currencies,
pushing down crude <CLc1> and other commodity prices.
                                
 "The index points that come off the lower oil prices are
larger than the index points that go on the stocks that might
potentially benefit from lower oil prices," said Darren Winder,
equity strategist at Cazenove.
                                
 Oil shares were the biggest sectoral loser, knocking 31
points off the index. BP <BP.L> dropped 2.6 percent, Royal Dutch
Shell <RDSa.L> shed 2.4 percent and gas producer BG Group <BG.L>
lost 2.6 percent.
                                
 Miners also suffered, with BHP Billiton <BLT.L>, Rio Tinto
<RIO.L>, Eurasian Natural Resources <ENRC.L>, Anglo American
<AAL.L>, Xstrata <XTA.L> and Vedanta Resources <VED.L> off
between 1.3 and 5 percent.
                                
 "The dollar actually rules the roost today," said Howard
Wheeldon, a senior strategist at BGC Partners. "We are reminded
that the dollar isn't just about oil, it has a significant
effect on all commodities."
                                
 "Bernanke has told us what we probably had come to already
accept but we needed the personal verification -- no more
interest rate cuts."
                                
 In the UK, the Bank of England is expected to leave rates
unchanged at 5 percent when it announces its verdict on
Thursday.
                                
 
                                
 SHIVERING BANKS
                                
 Banks felt a shiver from a tumble in Lehman Brothers shares
on concern that it may need to raise more capital, with Barclays
<BARC.L> down 3.1 percent, Lloyds TSB <LLOY.L> falling 1.2
percent, Royal Bank of Scotland <RBS.L> slipping 0.5 percent,
HBOS <HBOS.L> easing 3.1 percent and Standard Chartered <STAN.L>
losing 2.5 percent.
                                
 But Alliance & Leicester <ALLL.L> added 5 percent.
                                
 Also weighing on sentiment, a survey showed British consumer
confidence fell further in May with people even gloomier about
the state of the economy.
                                
 Marks & Spencer <MKS.L>, Kingfisher <KGF.L>, Home Retail
<HOME.L> and Next <NXT.L> were down 0.7 to 1.9 percent.
                                
 Housebuilders remained under pressure, with Persimmon
<PSN.L>, Taylor Wimpey <TW.L>, Barratt Developments and Bovis
Homes <BVS.L> down 2.3 to 6.9 percent after UBS issued a
negative sector note.
                                
 Index heavyweight Vodafone <VOD.L> shed 4.5 percent after
going ex-dividend.
                                
 British Airways <BAY.L> climbed 3 percent ahead of the
release of the airline's May traffic figures and as oil prices
fell.
                                
 Associated British Foods <ABF.L>, Enterprise Inns <ETI.L>,
Imperial Tobacco <IMT.L>, National Grid <NG.L> and WPP <WPP.L>
also fell after going ex-dividend.
                                
 Ex-divs took nearly 15 points off the index, according to
Reuters calculations.
 (Additional reporting by Michael Taylor; editing by Elaine
Hardcastle)