* FTSE down 2.2 percent as oils drop with crude price
* Miners drop with UBS downgrades, copper lows
* Banks hit by bearish Merrill note
By John Coppock
LONDON, Dec. 19 (Reuters) - Britain's FTSE 100 <> index
was down 2.2 percent by midday on Friday, led down by energy
groups as the oil price neared a five-year low, while more
misery was heaped on miners in the form of broker downgrades.
Banks were lower after a bearish note from Merrill Lynch,
which said they face another "very tough" year in 2009.
At 1130 GMT, the FTSE 100 index was 100.46 points lower at
4,230.20. "There's very little to excite the markets on the
corporate front," said Jeremy Batstone-Carr, head of private
client research at Charles Stanley.
"Conditions are ripe for a mini-rally after Christmas, but
frankly people will still be thinking about the outlook for
2009. Then we'll get into January and see fourth-quarter
earnings come out and a raft of downgrades.
"It's going to take a while for the actions taken by the
authorities to work through, and until we start to see the first
green shoots of recovery, investors will remain very cautious."
Energy companies continued to lead the market lower as oil
dropped below $36 a barrel to trade near a five-year low.
New York crude <CLc1> dropped 9 percent on Thursday, despite
a production cut by OPEC, on global recession fears. The
front-month contract for January expires on Friday; the new
crude contract <CLc2> priced oil for February delivery at
$42.22.
BP <BP.L> fell 4.7 percent to 499 pence, while Royal Dutch
Shell <RDSa.L> declined 3.8 percent to 1,744 pence and Cairn
Energy <CNE.L> slipped 6.0 percent to 1,791 pence.
Shell shares were further hit by its announcement that it
would not drill in Alaska's Beaufort Sea after a court ruling
that said U.S. officials failed to consider environmental
factors when granting the Anglo-Dutch oil group a permit.
Shares in Anglo American <AAL.L>, Xstrata <XTA.L> and
Antofagasta <ANTO.L>, already reeling from plummeting metals
prices, were further bashed by downgrades from UBS, which cut
all three miners to "neutral" from "buy".
Earnings forecasts for Anglo American and Xstrata next year
were cut by 83 percent and 85 percent respectively.
Antofagasta's 2008 forecasts were trimmed by 9 percent on lower
prices for copper, which hit a five-year low in Shangai
overnight.
Anglo, Xstrata and Antofagasta fell between 8.5 percent and
10 percent.
GRIM OUTLOOK FOR BANKS
Banks took a beating when Merrill Lynch analyst Stuart
Graham slashed his earnings estimates for European banks by 15
percent, expecting the credit crunch to reduce asset quality and
produce higher provisions.
Lloyds TSB <LLOY.L> shed a hefty 7.5 percent to 119 pence,
HSBC <HSBA.L> dropped another 2.6 percent to 609 pence, Barclays
<BARC.L> lost 1 percent at 138.7 pence and Royal Bank of
Scotland <RBS.L> fell 1.4 percent to 45.2 pence.
Meanwhile, Goldman Sachs cut ratings for European chemicals
companies, sending Johnson Matthey <JMAT.L> down 3.7 percent.
The broker sees the company, which processes platinum to make
catalytic converters, hitting 875 pence by the end of next year
as the car industry shrinks.
Cruise ships group Carnival <CCL.L> was one of the few
stocks sailing into positive territory after the release of
better-than-expected earnings in New York last night, rising 2.8
percent.
Numis Securities kept the stock as an "add", impressed by
the company's ability to offer discounted and shorter duration
cruise holidays to keep bookings alive in a downturn. Carnival
is "strongly value-competitive against land-based vacations,"
the broker said, though it cut its price target.
Among other positives, markets retreated into the usual
safe-haven stocks of pharmaceuticals and food retailers, with
drugmakers AstraZeneca <AZN.L> up 0.9 percent and
GlaxoSmithKline <GSK.L> up 1.8 percent.
