* Banks fall; Barclays slumps after Moody's downgrade
* Oils track weaker crude prices
* Rio Tinto gains on news it is in talks to sell assets
By Dominic Lau
LONDON, Feb 2 (Reuters) - Britain's leading share index fell
2 percent by midday on Monday, led by banks and oil producers,
as investors fretted about corporate profits, but Rio Tinto
<RIO.L> rose on new it was in talks to sell assets to China.
By 1133 GMT, the FTSE 100 <> was down 83.33 points at
4,066.34, after losing 6.4 percent last month to extend's 2008
dismal performance amid the credit crisis and on fears of a deep
and severe global recession.
"A gloomy start weather-wise and a gloomy start for the week
for the market," said Angus Campbell, head of sales at Capital
Spreads, referring to heavy snowfalls across the UK which
brought London's transport system to a near-standstill.
"We have a couple of pieces of bad news from the banking
sector ... obviously Barclays having their credit ratings
reduced by Moody's certainly hasn't helped banks."
Banks were the biggest losing sector after Barclays <BARC.L>
slumped 11.3 percent following Moody's Investors Service cut its
long-term ratings on the bank by two notches to Aa3. The credit
ratings agency cited expectations for "significant" further
losses due to credit-related writedowns and rising unemployment.
HSBC <HSBA.L>, Royal Bank of Scotland <RBS.L>, Lloyds
Banking Group <LLOY.L> and Standard Chartered <STAN.L> dropped
3.5 to 5.7 percent.
Oil producers were also weaker as crude prices <CLc1> fell.
BP <BP.L>, Royal Dutch Shell <RDSa.L>, BG Group <BG.L>, Cairn
Energy <CNE.L> and Tullow Oil <TLW.L> lost between 1.2 and 3
percent.
British manufacturers reported some of the weakest
conditions ever in January when they cut jobs at a record pace,
monthly purchasing managers index data showed.
South Korea's exports tumbled by a third, Australian house
prices fell, and news of more crippling losses hit Japanese
electronics stocks, adding to mounting evidence of a deepening
slowdown.
Hitachi Ltd <6501.T> warned of a record $7.8 billion annual
loss due to weak sales, a firmer yen and costs to restructure
its sprawling operations, sending its shares sinking 14 percent
in Tokyo.
RIO SHINES
Rio Tinto <RIO.L> was one of the five gainers on the index,
up 6.4 percent after the miner said it had held talks to sell
some assets to Chinese government-owned aluminium maker
Chinalco, its biggest shareholder, reportedly to cut debt by up
to $8 billion. []
But other miners slipped on softer metal prices. BHP
Billiton <BLT.L>, Anglo American <AAL.L>, Xstrata <XTA.L>,
Kazakhmys <KAZ.L>, Eurasian Natural Resources <ENRC.L> and
Antofagasta <ANTO.L> lost between 1.2 and 3.4 percent.
Among other individual movers, Wolseley <WOS.L> sank 6.4
percent after HSBC cut its price target on the building
materials distributor.
"We expect the company to breach its debt covenants at its
interim 2010 results, without any cash infusion from a potential
equity issue, which is likely to be very dilutive for earnings,"
HSBC said, keeping its "underweight" rating.
ICAP <IAP.L> shed 6.8 percent. The interdealer broker said
it was part of a group of financial companies considering a cash
offer for LCH.Clearnet, the London-based clearing house.
(Editing by Hans Peters)
