* FTSE 100 down 2.5 pct
* BoE leaves rates unchanged
* ECB comments send banks deep into negative territory
* Unilever tops gainers on new CEO
By Michael Taylor
LONDON, Sept 4 (Reuters) - Britain's leading shares index
fell sharply in late trade on Thursday as comments by the
European Central Bank and increased economic fears weighed on
banks, while the Bank of England held borrowing rates steady.
The FTSE 100 <> was down 137.6 points, or 2.5 percent
at 5,362.1 -- its biggest daily fall since July 11 -- after
earlier touching a high of 5,541.7 in the session.
On a busy day for economic data, comments from ECB President
Jean-Claude Trichet that euro zone economic data pointed to a
weakening in growth at mid-year with inflation remaining high,
weighed heavily.
He also said new measures to come in 2009 will require some
counterparties to bring forward extra collateral.
UK banks accounted for over 40 negative index points, with
Barclays <BARC.L>, HBOS <HBOS.L>, Lloyds TSB <LLOY.L> and HSBC
<HSBA.L> down 3.3-6.8 percent.
Before the ECB comments, as expected the Bank of England
kept interest rates unchanged at 5.0 percent for a fifth month
running, but expectations are rising that recession worries
could prompt a cut before the end of the year.
"On the one hand this is a measured reaction to the twin
problems of inflation and a contracting economy - stagnation by
any other name," said Felix Riley, CEO of ChoiceOdds.
"On the other hand, it could well be an admission of the
lack of ideas present in the great and the not-so-good... the
markets and industry would not be averse to an interest rate cut
- or two."
Adding to negative sentiment, a survey showed on Thursday
that British house prices fell for the seventh month running in
August to a record 12.7 percent lower than a year earlier.
Sterling, meanwhile, hit a record low versus the euro.
JOBLESS
U.S. stocks pushed into the red, sparked by weekly U.S.
government data which showed an unexpected jump in the number of
people filing for jobless benefits.
"It's general jitters over the state of the economy in the
U.S. -- there was quite a negative employment survey out," said
Sam Hart, an analyst at Charles Stanley. "Of course we've got
non-farm payrolls tomorrow afternoon and people are nervous that
they will be particularly weak."
"Trichet was pretty gloomy in terms of his outlook for the
European Union, so it's a combination of those two factors
really," he said, adding: "It's difficult to see any significant
upside in the near term."
In other UK stocks, British Airways <BAY.L> shed 4.8
percent, with a struggling pound and a rise in the price of
crude denting sentiment. Cruise operator Carnival <CCL.L> also
fell 3 percent.
Shares in Marks & Spencer <MKS.L> lost 5.4 percent on
newspaper reports that the GMB union plans to launch a series of
protests against the retailer after it sacked a member of staff
for gross misconduct on Wednesday.
Falling precious metal and energy prices dragged commodities
lower, with ENRC <ENRC.L>, Rio Tinto <RIO.L>, Royal Dutch Shell
<RDSa.L> and Anglo American <AAL.L> dipping between 2.9 and 5.5
percent.
Ferrexpo <FXPO.L> shed 6.3 percent as the Ukrainian iron ore
miner looked set to exit the UK's FTSE 100 index later this
month after a quarterly rejig.
"We tend to feel the market is going to trade in a
5,300-5,500 range (and) until we get some interest rate cuts in
the UK and Europe...it's difficult to see the market making any
progress," said Charles Stanley's Hart on the UK market.
On the upside, Unilever <ULVR.L> topped the UK's bluechip
leaderboard, rising 6.1 percent as investors cheered the food
producer's announcement of appointing Paul Polman, a consumer
goods veteran, as its new chief executive. []
BG Group <BG.L> climbed 0.8 percent with traders citing
market talk of bid interest from Exxon Mobil <XOM.N>. BG
declined to comment.
In midcaps, Whitbread <WTB.L>, Britain's biggest hotel and
restaurants operator, tacked on 0.6 percent after it reported
strong first-half sales growth. []
(Additional reporting by Dominic Lau, Atul Prakash and Jon
Hopkins; editing by Sue Thomas)
