* FTSE 100 slides 2.9 pct by midday
* Commodity stocks down on concerns of slowing demand
* Banks, retailers hit by recession fears
(For more on the financial crisis, click on [])
By Dominic Lau
LONDON, Oct 22 (Reuters) - Britain's FTSE 100 <> slid
2.9 percent by midday on Wednesday, as recession fears hit
heavyweight commodity stocks and banks, with investors worrying
about metal demand and more soured loans.
By 1029 GMT, the FTSE 100 was down 122.47 points at
4,107.26, after losing 1.2 percent on Tuesday to snap a
two-session recovery run. The UK benchmark is down 36 percent
for the year.
Energy stocks fell along with lower crude prices <CLc1>,
which traded below $70 a barrel, on growing fears that output
cuts by producer group OPEC will not be enough to offset
weakening energy demand from leading consumers.
BP <BP.L> sank 3.6 percent, Royal Dutch Shell <RDSa.L>
sagged 3 percent, Cairn Energy <CNE.L> lost 2.3 percent and
Tullow Oil <TLW.L> dropped 3.1 percent.
Weaker metal prices also weighed on mining stocks, with BHP
Billiton <BLT.L>, Rio Tinto <RIO.L>, Xstrata <XTA.L>,
Antofagasta <ANTO.L>, Anglo American <AAL.L>, Vedanta Resources
<VED.L> and Kazakhmys <KAZ.L> falling 4.9 to 11.8 percent.
BHP warned that Chinese demand was set to weaken, but the
company showed little sign of trimming production, lifting
quarterly iron ore output by 15 percent.
U.S. stocks dropped on Tuesday after a flurry of
disappointing earnings and as commodity-related shares sank on
fears of a global recession. In Asia, Japan's Nikkei average
<> tumbled 6.8 percent to its lowest close in a week.
Bank of England Governor Mervyn King said in a speech on
Tuesday night that Britain's economy was probably entering its
first recession in 16 years, and the outlook has not worsened as
rapidly as it has in the past month for a very long time.
[]
"Each day that comes along brings yet another reality check
of what we have to face. It's going to be tough," said Howard
Wheeldon, senior strategist at BGC Partners.
"Will we return to the lows? No. We will bounce around.
Volatility will remain. The worse may be over but the cure is
long way off."
The Bank of England minutes showed all nine Monetary Policy
Committee members voted for this month's globally co-ordinated
50 basis point emergency cut in interest rates.
Banks were among the standout losers on the FTSE 100.
Barclays <BARC.L>, Royal Bank of Scotland <RBS.L>, HBOS
<HBOS.L>, Lloyds TSB <LLOY.L>, HSBC <HSBA.L> and Standard
Chartered <STAN.L> dropped between 0.5 and 9.2 percent.
BANKS NEED MORE HELP?
INVESCO Asset Management chief group economist John
Greenwood said banks would face more losses as the recession
began to bite and governments would have to come up with more
bailouts.
"The scale of the problem is so large that we should regard
the (Henry) Paulson plan, the (Alistair) Darling plan in the UK
and other bank bailout plans as really just round one in what
would be a likely multi-round effort to stabilise the banking
system," he said.
"So far the losses that we have seen on the books of the
banks are largely due to mortgage securities. So far we have not
seen the losses due to the recession," he said. "Those losses
are still to come. That may seriously impact bank balance sheets
and may require further recapitalisation measures."
Retailers were also down amid the gloomy economic outlook.
Marks & Spencer <MKS.L>, Next <NXT.L> and Kingfisher <KGF.L>
were off between 2.3 and 7.7 percent.
BSkyB <BSY.L>, Smiths Group <SMIN.L> and Whitbread <WTB.L>
also fell after going ex-dividend.
Hedge fund Man Group <EMG.L>, however, advanced 2.2 percent
after it said the net asset value of its main AHL fund rose 1.9
percent last week.
Building materials distributor Wolseley <WOS.L> and builders
were also firmer as traders cited hopes that the UK may further
cut interest rates next month. Wolseley added 0.9 percent, while
mid-caps Barratt Developments <BDEV.L>, Taylor Wimpey <TW.L> and
Persimmon <PSN.L> gained 5.1 to 10.2 percent.
(Editing by Paul Bolding)
