Banks, energy stocks drag FTSE down; miners gain

* FTSE falls 0.2 pct led by banks and energy stocks

* Miners buoyed by M&A and China hopes

By David Brett

LONDON, Aug 16 (BestGrowthStock) – Britain’s top shares dropped on
Monday as the threat of litigation against BP over its oil spill
in the Gulf of Mexico hit energy stocks, and with banks down on
global economic recovery fears, outpacing miner gains.

By 1046 GMT, the FTSE 100 (.FTSE: ) was down 10.77 points, or
0.2 percent, at 5,264.67, having closed up 0.2 percent at
5,275.44 on Friday.

However, the FTSE over the course of last week shed 1.1
percent as worries over the outlook for economic recovery after
the U.S. and the UK downgraded their GDP forecasts.

“The news from the states and here in the UK last week is
still fresh in investors’ minds, and in the midst of the
(British) summer holiday season there is little to tempt the
bulls back into the market,” said Jimmy Yates, head of equities
at CMC Markets.

Banks, sensitive to economic pressures, were among the
sharpest fallers, with Royal Bank of Scotland (RBS.L: ) and Lloyds
Banking Group (LLOY.L: ) down 1.6 and 0.5 percent respectively.

Adding to the downward pressure on the FTSE, U.S. stock
index futures pointed to a lower open on Wall Street on Monday
as worries about the global economy persisted.

Investors looking for further clues as to the health of the
world’s largest economy await the New York Federal Reserve
Empire State Manufacturing Survey for August due at 1230 GMT.

At 1400 GMT, the National Association of Home
Builders/Wells Fargo issues the August housing market index.

Results from state-side retailers Lowe’s Co. (LOW: ) and Urban
Outfitters (URBN.O: ) will be watched, and third-quarter earnings
from Agilent Tech (A.N: ) and fourth-quarter results from SYSCO
Corp are also due.(SYY.N: )

Elsewhere, British insurer Aviva (AV.L: ), down 0.5 percent,
failed to see off bid speculation despite rejecting a 5 billion
pound ($7.81 billion) offer from rival RSA (RSA.L: ) that analysts
and shareholders said might add up. [ID:nLDE67F07V]

RSA Insurance Group fell 1.5 percent.

Meanwhile, BP (BP.L: ) shed 1.6 percent with traders pointing
to mounting worry on the legal threat facing the oil giant after
Alabama said it is suing for “catastrophic harm” caused by the
Gulf of Mexico oil spill.

The news took the shine off the energy sector which was
initially performing well with a rallying crude (CLc1: ). BG Group
(BG.L: ) and Royal Dutch Shell (RDSa.L: ) reversed earlier gains,
falling 0.4 and 0.2 percent respectively.


Gains among miners restricted losses on the FTSE 100 as
Vedanta Resources (VED.L: ), up 5.7 percent, made its play for a
controlling stake in Cairn India (CAIL.BO: ).

Vedanta will spend up to $9.6 billion acquiring as much as
60 percent of Cairn India, branching out into oil and gas and
delivering a cash windfall to its current owners.

Edinburgh-based Cairn Energy (CNE.L: ), which holds 62.4
percent of Cairn India, added 3.3 percent.

“Companies are building strong balance sheets and seeing
some recovery in income without translating that into employing
more staff or spending it on IT, so that could be a positive
indicator (for M&A activity) going forward,” said Richard
Hunter, head of UK Equities at Hargreaves Lansdown Stockbrokers.

The miners also received a boost as Credit Suisse said in a
note that it saw stronger future demand from China, which it
believes “is on the cusp of a rebound in after nearly a year of
sharp slowing”.

Xstrata (XTA.L: ), one of Credit Suisse’s favoured mining
large cap plays, climbed 1.0.

Gold miners African Barrick Gold (ABGL.L: ) and Randgold
(RRS.L: ) each rose 1.1 percent, as investors continued to seek
the safe haven characteristics of the precious metal (XAU=: ),
which rose to its strongest in seven weeks.
(Editing by Hans Peters)

Banks, energy stocks drag FTSE down; miners gain