* FTSE 100 down 0.2 pct
* Firmer crude, strong BP Q2 results lift energy stocks
* Merrill's $5.7 bln writedowns weigh on banks
By Dominic Lau
LONDON, July 29 (Reuters) - Britain's top share index had
slipped by midday on Tuesday, but still outperformed other major
European indexes as firmer crude prices and strong BP <BP.L>
quarterly results helped cushion the impact of gloom in banks.
By 1025 GMT the commodity-heavy FTSE 100 <> index was
down 10 points, or 0.2 percent, at 5,302.6, after falling as
much as 1 percent earlier in the session. The UK benchmark index
is on track for its fourth straight session of losses.
Banks were the biggest drag on the index after Merrill
Lynch's <MER.N> $5.7 billion third-quarter writedowns raised
fresh concerns over the embattled sector.
HSBC <HSBA.L>, Barclays <BARC.L>, Royal Bank of Scotland
<RBS.L>, HBOS, Lloyds TSB and Standard Chartered <STAN.L> were
down between 1.3 and 8.5 percent.
"The fact that we saw such weakness in the United States
last night and ongoing concern about the banking sector have
continued to weigh on the market," said David Jones, chief
market strategist at IG Index.
"The next technical level for the FTSE 100 is the July 18
lows at 5,215. I think there is scope for further weakness from
where we are now."
UK retailers also felt the chill of slowing economic growth
and falling property prices, as a survey from the Confederation
of British Industry showed retail sales fell at a record annual
pace in July. []
Marks & Spencer <MKS.L>, Next <NXT.L>, Kingfisher <KGF.L>,
Sainsbury <SBRY.L> and Tesco <TSCO.L> shed 0.7 to 2.8 percent.
"We are heading into a backdrop of a UK economy which is
clearly suffering. We even have the prospect that the Bank of
England might raise interest rates some time in the near future.
It's not going to help the market. It's a toxic combination of
events," said Peter Dixon, UK economist at Commerzbank.
Investors will keep an eye on the U.S. consumer confidence
data for July due at 1400 GMT as well as the S&P/Case-Shiller
U.S. home price index due at 1300 GMT for further evidence on
the health of the American economy.
PAIN RELIEF
Energy stocks, however, were in demand as crude prices
<CLc1> rose, and after BP <BP.L> said second-quarter net profits
soared and beat analysts' expectations thanks to high oil
prices.
BP was up 2 percent, while Royal Dutch Shell <RDSa.L>, gas
producer BG Group <BG.L>, Tullow Oil <TLW.L> and Cairn Energy
<CNE.L> advanced between 0.9 and 4.8 percent.
Higher precious metal prices also boosted index heavyweight
miners, with BHP Billiton <BLT.L>, Rio Tinto <RIO.L>, Anglo
American <AAL.L>, Xstrata <XTA.L>, Antofagasta <ANTO.L>, Lonmin
<LMI.L> and Eurasian Natural Resources <ENRC.L> all up.
Vedanta Resources <VED.L> rose 5 percent as the
India-focused metals group posted a 6.3 percent rise in
first-quarter core earnings as higher output outweighed weaker
zinc prices and rising costs.
A strong run from commodity stocks has helped the FTSE
outperform Germany's DAX <> and France's CAC 40 <> so
far this year, but continuous weakness in banks threatens to
drag the index down.
The FTSE 100 has lost nearly 18 percent so far this year,
compared with falls of 22 percent for the DAX and 24 percent for
the CAC 40.
Compass Group <CPG.L> climbed 4.9 percent, rebounding from
the previous session's falls, in line with the broader market,
despite reporting a strong third quarter. Credit Suisse on
Tuesday reiterated its "outperform" rating on the world's
biggest caterer.
British Airways <BAY.L> was up 1.1 percent after the airline
said it and Spanish airline Iberia <IBLA.MC> were holding merger
talks. []
(Additional reporting by Atul Prakash and Michael Taylor)
