* Insurers weak; banks lower as bad loans worries weigh
* Drugs fall; AstraZeneca knocked by broker downgrade
* Tesco higher after reassuring results
* UK inflation falls in-line with expectations
By Jon Hopkins
LONDON, April 21 (Reuters) - Britain's top share index was
0.6 percent lower at midday on Tuesday with weakness in
insurers, banks and drug issues countering strength in retailers
after better-than-forecast results from Tesco <TSCO.L>.
By 1049 GMT, the FTSE 100 <> index was down 22.38
points at 3,968.48, back below the 4,000 level having peeked
back above that level earlier in the session.
The benchmark index shed 2.5 percent on Monday, its biggest
percentage fall since March 30, and is down 10.6 percent this
year, but up 14.6 percent after hitting a six-year low on March
9.
"Today the market is still taking a pause for breath," said
Joshua Raymond, market strategist at City Index.
"We saw profit-taking yesterday after the disappointing Bank
of America earnings and investors have Alistair Darling's budget
to digest tomorrow so trading has been muted this morning."
Pharmaceutical issues were the worst blue chip performers,
dragged back by a 2 percent decline in AstraZeneca <AZN.L>
following a downgrade by Banc of America-Merrill Lynch to
"underperform" from "neutral" in a cautious sector review.
Peers GlaxoSmithKline <GSK.L> and Shire <SHP.L> lost 0.6
percent and 1 percent, respectively.
Insurers were also weak, with Aviva <AV.L>, Prudential
<PRU.L>, Old Mutual <OML.L>, Legal & General <LGEN.L> and
Friends Provident <FP.L> falling 1.6 percent to 4.6 percent.
Prudential suffered after Morgan Stanley cut its rating to
"underweight" from "equal-weight" amid concerns about its U.S.
operations.
UK banks extended Monday's slide, reversing more of last
week's rally following further reflection of results from Bank
of America <BAC.N>, which saw a 41 percent quarterly increase in
bad loans at the largest U.S. bank.
Standard Chartered <STAN.L>, HSBC <HSBA.L>, Lloyds Banking
Group <LLOY.L> and Royal Bank of Scotland <RBS.L> lost between
0.3 percent and 1.7 percent.
INFLATION IGNORED; BUDGET KEY
British annual consumer price inflation eased to a one-year
low in March, while retail price inflation turned negative for
the first time in nearly 50 years.
The Office for National Statistics said consumer prices rose
by 0.2 percent in March, taking the annual rate down to 2.9
percent, its weakest since March 2008.
Retail price inflation, a wider cost of living index which
includes housing costs, was flat on the month and fell to -0.4
percent year-on-year, the first negative annual reading since
March 1960.
"Inflation is falling in the UK -- that is official from
both CPI data and RPI, now the MPC (Bank of England Monetary
Policy Committee) need only concern itself with death spiral
deflation and the sprinkling depression, said Manus Cranny,
senior market commentator at MF Global Spreads.
"Although as the market awaits Alistair Darling and his
budget speech on Wednesday we will again be strictly focused on
the green shoots of recovery rhetoric," Cranny said.
British finance minister Darling is expected to spend an
extra 1 billion pounds to support the construction industry in
Wednesday's budget, a government source told Reuters on Monday.
[]
Tesco was a strong blue chip performer, 5.8 percent higher
after Britain's biggest retailer beat forecasts with a 10
percent rise in annual profit to 3.13 billion pounds and said
its underlying British sales growth accelerated in the first
few weeks of its new financial year.
Other retailers pushed higher with Sainsbury <SBRY.L> up 2.4
percent and Wm. Morrison Supermarkets <MRW.L> adding 1.4
percent, while Argos-owner Home Retail Group <HOME.L> added 1.8
percent and Marks & Spencer <MKS.L> firmed 0.3 percent.
Associated British Foods <ABF.L> was the top FTSE 100 riser,
up 6.9 percent after it beat forecasts with a 2 percent dip in
first-half profit as growth at its discount fashion chain
Primark and in sugar sales offset tough trading in other areas.
(Editing by Andrew Macdonald)
