* FTSE 100 down 0.8 percent
* Miners, energy stocks fall; demand outlook dims
* Some defensive stocks firmer
By Simon Falush
LONDON, June 24 (Reuters) - Britain's top share index was
lower at midday Thursday as renewed doubts about the
sustainability of a global recovery dented commodity stocks, and
banks weakened as investor appetite for risk ebbed.
By 1100 GMT, the FTSE 100 <> was 38.73 points, or 0.8
percent, lower at 5,139.79 after falling 1.3 percent on
Wednesday to its lowest closing level in nearly two weeks.
In a statement on Wednesday at the end of a two-day meeting,
the U.S. Federal Reserve scaled back its assessment of the pace
of recovery, taking note of pockets of weakness, and also issued
a cautionary note about volatile financial markets in light of
Europe's debt woes.
The shaky demand outlook on this cautious statement offset
any optimism for the mining sector from political developments
in Australia which appointed a new prime minister, Julia
Gillard, the first woman to hold the office.
She offered to end a dispute over a controversial "super
profits" mining tax threatening $20 billion worth of investment
in the country and which has unnerved voters.
Miners were the main drag on the index, with Rio Tinto
<RIO.L> and Xstrata <XTA.L> among the heaviest fallers, down 2.4
percent and 1.7 percent respectively.
The downbeat U.S. news reinforced a sense that a recovery in
stocks, which saw seven days of consecutive gains earlier this
month, was driven by technical factors rather than a conviction
the global economic situation was improving.
"People are arguing the recent rally was just a short
squeeze (where investors liquidate short positions) and funds
having to invest," said Jack Sheehan, analyst at Pretium
Securities. The (European debt) situation has not disappeared.
Illustrating the fragility of euro zone finances, five-year
credit default swaps (CDS), an insurance-like instrument against
debt default, rose to 958 basis points for Greece from 934 bps
in New York on Wednesday, CDS monitor CMA DataVision said.
Energy stocks also slipped, pulled lower by a slight retreat
in the price of crude <CLc1>. Royal Dutch Shell <RDSa.L> and BG
Group <BG.L> fell 1.5 percent and 1.9 percent respectively.
TECHNICALS WATCHED
Traders were also focused on technical support levels for
the FTSE 100, with trendlines indicating 5,099 would be closely
watched, said Phil Roberts, chief European technical strategist
at Barclays Capital.
If that level was breached a move below 5,000 would be
likely with the next serious support at 4,900, the level it
reached at the end of May, Roberts said.
Analysts said austerity measures like those announced by
Britain's finance minister, George Osborne, on Tuesday were
adding to the gloom.
"There is a huge bill to be paid off for the measures
implemented to help solve the financial crisis, and now that
bill's landing on the mat, and investors are looking ahead to
five years of fiscal tightening," Henk Potts, analyst at
Barclays Wealth said.
Banks were also depressed by doubts on the recovery. Royal
Bank of Scotland <RBS.L> fell 1.7 percent while Barclays
<BARC.L> lost 1.3 percent.
Stocks perceived as relatively immune to economic stagnation
like supermarkets and utilities outperformed. Morrison
Supermarkets <MRW.L> added 1.6 percent, while National Grid
<NG.L> gained 0.9 percent.
Centrica <CNA.L> was a blue chip top gainer, up 2.2 percent
after the gas distributor was added to JPMorgan Cazenove's
Analyst Focus list as its price target was increased.
No important domestic data was released on Thursday, so
investor attention was on a batch of U.S. pointers including May
durable goods orders and the latest weekly jobless claims, both
due at 1230 GMT.
(Editing by Dan Lalor)
