* FTSE down 0.6 percent; commodities weigh
* BP lower on fresh credit worries and clean up fears
* Banks gain on legislation hopes
By David Brett
LONDON, June 25 (Reuters) - Britain's top shares fell by midday on Friday, as BP <BP.L> slid over worries of the financial impact of the Gulf of Mexico oil spill, the worst U.S. environmental accident, and miners weighed due to fears for the economic recovery.
At 1035 GMT, the FTSE 100 <
> index was down 29.44 points, or 0.6 percent at 5,070.79.BP <BP.L> knocked over 18 points off the index, falling 7.6 percent to a 14-year low, pressured by mounting concerns over its financial position and the threat to its clean up operation of the biggest U.S. oil spill ever from the impending hurricane season.
A Nomura note said: "Perception of near-term credit risk is highly damaging for BP, likely leading to constraints around counterparty trading, the attractive roll of drawn commercial paper and the ability to dispose of assets at attractive prices."
Five-year BP credit default swaps, an insurance-like instrument against debt default, widened 19 basis points to 555 basis points, CDS monitor Markit said.
"BP is staring down the barrel of an unidentified financial liability," Stephen Pope, chief global equity strategist at Cantor Fitzgerald.
BP's plight again dented sector sentiment with integrated oils Royal Dutch Shell <RDSa.L> and BG Group <BG.L> shedding 0.8 and 1.8 percent respectively.
Heavyweight miners were lower as worries about the strength of the global economic recovery weighed on demand for commodities which fell across the board.
Eurasian Natural Resources <ENRC.L> dropped 4.4 percent, while Rio Tinto <RIO.L> and Vedanta Resources <VED.L> shed 3.2 and 3.3 percent respectively.
The FTSE 100 closed down 78.29 points, or 1.5 percent at 5,100.23 on Thursday, its lowest closing level in almost a month and is down 3 percent so far this week, albeit in thin trade.
Technical levels were also being watched with the index not far off key support levels.
"If we start drifting below 4,976 then that could open up a deep channel that could potentially take us down a further 200 points or so," Pope at Cantor Fitzgerald said.
Elsewhere, retailers were under pressure as Morgan Stanley took an axe to its rating and targets in a cautious sector review, noting the likely impact of budget tax changes on consumers.
Next <NXT.L> and Kingfisher <KGF.L> were the worst off, down 1.1 and 0.9 percent respectively as the broker cut its stance on both to "equal-weight" from "overweight".
BANKING SUPPORT
UK-listed banks topped the FTSE 100 <
> leaders board, preventing the index from sliding further, headed by emerging markets specialist Standard Chartered <STAN.L> and global giant HSBC <HSBA.L>, up 2.5 and 1.5 percent respectively.A Financial Times report on Friday said that the Bank for International Settlements (BIS) would tell the G20 summit of world leaders this weekend it would drop proposals for a Net Stable Funding Ratio (NSFR) for banks.
Deutsche Bank said, if the report is true, it would see this as positive for the UK banks, whose use of wholesale funding is higher than their peer group.
Investors also looked ahead to the outcome of the G8 and G20 world leaders' summits in Canada this weekend, with banking regulation and levies sure to be on the agenda. [
]U.S. stock index futures pointed to a weaker open on Wall Street on Friday, ahead of the final estimate of U.S. GDP growth in the first quarter, due to be published at 1230 GMT and the final reading of the June University of Michigan consumer sentiment index at 1355 GMT. (Editing by Sharon Lindores)