* FTSE down 0.7 pct at midday
* Banks down ahead of rate decisions Thursday
* Oils weak despite steadier crude price
* Rio falls; company says has no current rights issue plans
By Jon Hopkins
LONDON, Dec 3 (Reuters) - Britain's leading share index
<> was down 0.7 pct at midday on Wednesday, with oil majors
weak again and investors cautious on banks ahead of Thursday's
interest rate decisions in the UK and Europe.
At 1204 GMT, the FTSE 100 index <> was down 27.64
points at 4,095.22, having closed 57.37 points, or 1.4 percent
higher at 4,122.86 on Wednesday.
"Overall trading is very thin as investors sit on their
hands awaiting tomorrow's interest rate moves," said Mic Mills,
a trader at spread betting firm ETX Capital.
"The only question is whether it will be 1 percent or more
from the MPC and will Europe cut the expected 50 basis points or
can we hope for 75", Mills added.
Trading in banks was nervous ahead of Thursday's interest
rate news as the sector's woes continued to dominate.
HBOS <HBOS.L> and Lloyds TSB <LLOY.L>, both risers on
Tuesday, lost 2.5 and 4.8 percent respectively, while Barclays
<BARC.L> shed 3.3 percent.
"There is lots of nervousness as to how aggressive the Bank
of England will be tomorrow," said Henk Potts, equity strategist
at Barclays Stockbrokers.
"The bigger the party, the worse the hangover and the credit
expansion party was very big, so some historically strong
medicine is needed from the Bank of England," Potts added.
Royal Bank of Scotland <RBS.L>, however, added 1.3 percent
after an index re-weighting of the stock last night.
Weakness in oil majors was the main drag for blue chips as
crude prices <CLc1> rallied slightly but stayed around the $47 a
barrel level -- over $100 down on this year's peak.
BP <BP.L> shed 2.7 percent, while Royal Dutch Shell <RDSa.L>
fell 2.6 percent and BG Group <BG.L> lost 1.8 percent.
BP said on Wednesday it has agreed to an asset swap with BG
Group in the UK North Sea.
RIO WEAK; RIGHTS ISSUE TALK DENIED
Shares in Rio Tinto <RIO.L> fell 9.9 percent. The miner said
on Wednesday it had no current plans for a rights issue. Traders
had pointed to speculation Rio may have to raise capital with a
cash call as a reason for the share price fall.
Other miners were mixed. Xstrata <XTA.L> was down 1.9
percent, and Anglo-American <AAL.L> off 0.2 percent, but
Kazakhmys <KAZ.L> added 2.5 percent, while Vedanta Resources
<VED> gained 3.8 percent, in spite of trading ex-dividend
Wednesday, after recent share buy-back moves.
BHP Billiton <BLT.L> firmed 1 percent as Citigroup resumed
coverage on the stock with an upgrade to "buy" from "hold".
Stagecoach <SGC.L> was the biggest FTSE 100 faller, down 16
percent as a cautious outlook statement accompanied a 24 percent
rise in first half profits.
Blue chip transport peer Firstgroup <FGP.L> lost 8.5
percent, and mid cap Go-Ahead Group <GOG.L> shed 14.7 percent.
U.S. stocks were seen opening lower after Tuesday's rally,
with the U.S. non-manufacturing ISM index awaited.
Britain's dominant services sector shrank in November at its
fastest pace since the series began in 1996.
The Chartered Institute of Purchasing and Supply/Markit
purchasing managers' index for the sector fell to 40.1 last
month from 42.4 in Oct, below the consensus forecast of 41.2.
Meanwhile, annual British shop price inflation eased to 2.7
percent in November from 3 percent in October, the lowest since
June, the British Retail Consortium said on Wednesday.
(Editing by Greg Mahlich)
