* FTSE 100 falls 2.6 pct
* Banks, except HBOS and RBS, fall despite UK rescue package
* Heavyweight commodity stocks fall on growth concerns
(Click on [] for more on financial turmoil)
By Dominic Lau
LONDON, Oct 8 (Reuters) - Britain's top share index slid 2.6
percent by midday on Wednesday as recession fears stemming from
a credit crisis battered commodity stocks, but Royal Bank of
Scotland <RBS.L> and HBOS <HBOS.L> rebounded on news of a UK
rescue plan.
By 1046 GMT, the FTSE 100 <> was down 119 points at
4,486.2, after falling to 4,245.3 to touch a five-year low
earlier in the session. It is down 32 percent for the year.
HBOS and RBS leapt after falling 40 percent in the previous
session, supported by a government plan to inject up to 50
billion pounds ($87 billion) into the ailing banking sector.
HBOS soared nearly 52 percent, also boosted by relief that
its acquisition by Lloyds TBS <LLOY.L> was on course, traders
said, while RBS surged 26 percent.
Under the bank rescue plan at least 200 billion pounds will
be made available to UK banks under a special liquidity scheme,
and banks will increase their total Tier 1 capital by 25 billion
pounds.
The government will also provide an incremental minimum of
25 billion pounds of further support for all eligible
institutions, in the form of preference shares, PIBS or as
assistance to an ordinary equity fund-raising.
But the rest of the sector remained under pressure, with
Barclays <BARC.L>, Lloyds TSB <LLOY.L>, HSBC <HSBA.L> and
Standard Chartered <STAN.L> losing between 1.2 and 11.8 percent.
The FTSE 350 banks index <.FTNMX8350> lost 1.9 percent.
"It's not good out there. Whatever anybody wants to think
about this deal, I give it more than cautious welcome," said
Howard Wheeldon, senior strategist at BGC Partners.
"It will sufficiently do the job for the UK. But the UK is
only one market in isolation. In a global market environment,
what the UK is doing is just one piece of the jigsaw."
SPREADING CREDIT CRISIS
U.S. and Asian markets fell sharply again overnight, with
Tokyo's Nikkei average <> down 9.4 percent, as fears
mounted that the rapidly spreading credit crisis would drag the
global economy into a deep recession.
U.S. futures pointed to a weaker opening on Wall Street.
U.S. Federal Reserve Chairman Ben Bernanke said the U.S.
economy was being battered by a financial crisis of "historic
dimension" and that the risk for inflation has eased with the
falling prices for oil and other commodities.
Other financials fell, with insurers Prudential <PRU.L>, Old
Mutual <OML.L>, Legal & General <LGEN.L> and Aviva <AV.L> losing
4 to 7.6 percent, and hedge fund Man Group <EMG.L> dropping 2.8
percent.
Commodity stocks also sank along with base metal and crude
prices <CLc1> on slowing demand as global growth eased.
BP <BP.L>, Royal Dutch Shell <RDSa.L> and BG Group <BG.L>
dropped 3.1 to 4.7 percent, while miners BHP Billiton <BLT.L>,
Rio Tinto <RIO.L>, Anglo American <AAL.L>, Eurasian Natural
Resources <ENRC.L>, Xstrata <XTA.L> and Vedanta Resources
<VED.L> sagged 5.7 to 9.7 percent.
Sainsbury <SBRY.L> shed 5.2 percent on concerns over
shoppers switching to cheaper ranges and after traders said
Kaupthing had placed 168 million shares in the company at 250
pence each.
The supermarket group, which posted second-quarter sales
towards the top of forecasts earlier in the day, declined to
comment on the placing.
Tesco <TSCO.L>, Morrison Supermarkets <MRW.L> and Kingfisher
<KGF.L> also fell after going ex-dividend.
(Editing by Richard Hubbard)
