Banks retreat, miners drag down FTSE by midday

                                
 * FTSE 100 drops 2.1 pct by mid-session
                                
 * Banks lead losses after three days of strong gains
                                
 * Miners slide on lower metals prices, Xstrata rights issue
                                
 
                                
 By Kylie MacLellan
                                
 LONDON, Jan 29 (Reuters) - Britain's leading index of shares
fell 2.1 percent by mid-session on Thursday as banks retreated
from a three-day rally, and miners were weighed down by lower
metals prices and an Xstrata <XTA.L> rights issue plan.
                                
 By 1149 GMT the FTSE 100 <.FTSE> had fallen 90.04 points to
trade at 4,205.16, having gained 2.4 percent on Wednesday.
 The index is down 5.2 percent so far this month having slid
more than 31 percent last year -- its worst annual drop since
its launch in 1984. 
                                
 UK banks were the biggest losers, as investors took stock
after three days of hefty gains that have seen the sector rise
17.8 percent this week <.FTNMX8350>.
                                
 "It shouldn't be much of a surprise that we are down...I
think people are just taking a little bit of profit," said Rob
Griffiths, equity strategist at Cazenove.
                                
  Lloyds Banking Group <LLOY.L> led the fall, down 11.9
percent, having gained more than 50 percent on Wednesday as
fears it would be nationalised faded.
                                
 "If you look at the prices of the banks we're pretty much
exactly where we were two weeks ago so that (nationalisation)
scare has in a sense passed and now we are back into normal
territory,"  Griffiths added.
                                
Barclays <BARC.L> was among the FTSE's top losers, down 9
percent, but at 97 pence was still well above the 47 pence it
touched last week. 
                                
 HSBC <HSBA.L>, Standard Chartered <STAN.L> and Royal Bank of
Scotland <RBS.L> fell between 4.5 and 5.6 percent. 
                                
 Private equity group 3i <III.L> tumbled 17.1 percent and
touched a record low of 183 pence as investors continued to
react negatively to Wednesday's news that the value of its
investments had plunged in the last quarter.
                                
 
                                
 MINERS DENTED
                                
 Miners were also among the biggest movers as the recent
tumble in metals prices forced them to look at ways of raising
capital.
                                
 Debt-laden miner Xstrata fell 9 percent after it said it is
set to launch a $5.9 billion capital raising as it looks to
reduce its debt burden in the wake of the global commodities
slump. [ID:nLT603843]
                                
 "Mining stocks are quite heavily leveraged and on the basis
that commodities have been under pressure recently it's perhaps
not surprising the stock has been marked down on the back of
that announcement," said Richard Hunter, head of equities at
Hargreaves Lansdown.
                                
 Rio Tinto <RIO.L> fell 6.1 percent after newspaper reports
said the miner is in talks with Chinalco [ALUMI.UL], the Chinese
state-owned metals group, about a capital injection and sale of
assets.
                                
 Other miners were also under pressure with copper, zinc and
aluminium prices all down.
                                
 Anglo American <AAL.L>, Eurasian Natural Resources <ENRC.L>
and Antofagasta <ANTO.L> fell between 3.1 and 5.2 percent. 
                                
  Royal Dutch Shell <RDSa.L> gained 0.2 percent after it said
its fourth quarter current cost of supply net profit fell 28
percent to $4.79 billion as crude prices collapsed but raised
its dividend while lifting planned investments.
                                
 But other energy stocks retreated as crude prices slipped to
around $41 per barrel <CLc1>. BP <BP.L>, Cairn Energy <CNE.L>
and BG Group <BG.L> slid between 0.5 and 6.8 percent.
  Shares in pharmaceuticals giant AstraZeneca <AZN.L> slid 4.5
percent after it broadly met expectations, but traders said lack
of sales growth forecast for the year dented sentiment. 
                                
 British Sky Broadcasting <BSY.L> was one of a handful of
companies in positive territory, up 2 percent after ratings
agency S&P raised its price target and Goldman Sachs removed it
from its pan-European conviction sell list.
                                
 Among midcaps <.FTMC>, industrial materials producer Cookson
Group <CKSN.L> was the heaviest loser falling 15.3 percent after
it announced a 240 million cash call and said it was cutting
1,250 jobs and scrapping its dividend in response to plunging
steel markets. [ID:nLT650214]
                                
 For a timeline on the British recession, click on:
http://uk.reuters.com//news/globalcoverage/timelines/timeline?tx=20090128155121.xml&tn=The%20road%20to%20recession%20in%20Britain
                                
(Editing by Elaine Hardcastle)