* FTSE down 0.5 pct
* Japan quake knocks sentiment, insurers
* Investors flee risky assets
By David Brett
LONDON, March 11 (Reuters) - Britain's top share index
headed for its biggest weekly fall since July on Friday, testing
support levels around 5,800, after a huge earthquake in Japan
knocked already shaky sentiment.
By 1222 GMT, the FTSE 100 <> was down 26.18 points or
0.5 percent at 5,819.11. The index was down over 2.5 percent on
the week, setting a fresh intraday low for the year of 5,796.44.
"It feels to me like a steady correction towards the low end
of a trading range rather than something that looks anymore
uncomfortable than that," Paul Kavanagh a partner at Killik &
Co, said.
"Sentiment has taken around 200 points off the FTSE, without
trying to sound too complacent, the 200-point drop demonstrates
there is underlying resilience to it."
Investor confidence has been tested by euro zone debt
concerns, spreading political unrest in the Middle East and
North Africa and worries about the Chinese and the United States
economies.
London's blue chips hung around the 50 percent Fibonacci
retracement level of 5,812, from the Nov. 30 low to the late
February high.
Life insurers <.SXIP> such as Prudential <PRU.L>, Aviva
<AV.L> and Standard Life <SL.L> fell 1.0 to 1.7 percent after an
8.9 magnitude earthquake hit the northeast coast of Japan
triggering a 10-metre tsunami. []
Analysts said Lloyds of London [] insurers such as
Catlin <CGL.L>, down 4.5 percent, could be affected by the
disaster.
"At the moment this is just a kneejerk reaction within the
sector ... then people start focusing on exactly where the
exposures lie," Joshua Raymond, market analyst at City Index,
said.
OIL SLIDE
Integrated oils <.FTNMX0530> were the sharpest fallers as
investors monitored events in the Middle East and North Africa.
Troops loyal to Libyan leader Muammar Gaddafi battled to
retake the oil port of Ras Lanuf on Friday. []
The threat of unrest spreading to other oil-producing
nations in the region such as Saudi Arabia remains, which could
disrupt oil supplies.
Banks <.FTNMX8350>, which were lower on Thursday after
Moody's cut Spain's credit rating, fell further ahead of a
summit of European ministers. []
Inflation worries persisted in the UK as factory gate
inflation rose to its highest annual rate in more than two years
in February.
Killik's & Co's Kavanagh said the UK retail sector is
already showing signs of deterioration in the face of higher
inflation and interest rises on the horizon.
Home Retail <HOME.L>, down 1.2 percent, delivered a profit
warning and grim forecast for 2011-12 on Thursday, raising fears
of a major downturn in consumer spending.
"Once interest rates begin to rise you can almost kiss the
sector goodbye," Kavanagh said.
On the upside, ARM Holdings <ARM.L> gained 1.9 percent, as
RBS reiterated its "buy" rating on the stock, saying oversupply
issues, which had caused some concern and pressured the shares,
won't be a serious long-term problem.
U.S. stock index futures pointed to a lower open on Wall
Street with U.S. February retail sales figures, March
preliminary Reuters/University of Michigan consumer sentiment
survey and U.S. January business inventories due for release.
(Editing by Erica Billingham)
