* Banks lower on Mervyn King's comments on regulation
* Energy firms, miners down
* Food retailers up; Nomura hikes Tesco target
* London Stock Exchange falls on Goldman downgrade
By Paul Sandle
LONDON, Oct 21 (Reuters) - Britain's top share index was
1 percent lower in midday trade on Wednesday, as miners and
energy stocks fell on weakness in commodity prices while banks
fell after the BoE Governor said regulation would be tightened.
At 1208 GMT the FTSE 100 <> was down 57.92 points at
5,185.48, after closing 0.7 percent lower in the previous
session having hit a fresh high for the year at 5,298.54.
Banks weighed on the index after King said late on Tuesday a
fundamental rethink of how the banking sector is structured was
needed to prevent a recurrence of the financial crisis.
[]
RBS <RBS.L>, 2.8 percent weaker, led the sector lower, with
Standard Chartered <STAN.L> down 1.9 percent and Barclays
<BARC.L> and HSBC <HSBC.L> 1.1 and 0.9 percent lower
respectively.
"They are being given permission to rebuild their capital
base but don't be under any illusion that once that is deemed to
have been restored the regulatory backdrop is going to change,"
said Philip Lawlor, Chief Portfolio Strategist at Nomura.
Lloyds <LLOY.L> fell 1.9 percent. Sources said Britain's
regulators are moving closer to approving a plan by the bank to
escape a costly government-backed scheme for bad debts.
[]
Energy issues reversed early gains as crude prices <CLc1>
slipped to just over $78 a barrel. BG Group <BG.L>, BP <BP.L>
and Royal Dutch Shell <RDSa.L> fell 2.6 to 0.7 percent.
Miners were also weaker, dented by softer metal prices. Rio
Tinto <RIO.L>, Xstrata <XTA.L>, Lonmin <LMI.L>, Anglo American
<AAL.L>, Kazakhmys <KAZ.L> and Fresnillo <FRES.L> were 2.4 to 3
percent lower.
Food retailers were higher, led by a 1.8 percent gain in
Tesco <TSCO.L> after Nomura upped the stock's target price to
526 pence from 405p with a "buy" rating.
Plumbing supplies group Wolseley <WOS.L> was the top riser,
up 3.5 percent after BofA Merrill Lynch upgraded its stance on
the stock to "buy" from "underperform".
The broker also upped its recommendation on blue chip real
estate firms Hammerson <HMSO.L>, to "buy" from "neutral", and
Land Securities <LAND.L>, to "neutral" from "underperform". The
shares rose 1 percent and 0.5 percent respectively.
The FTSE 100 has so far rebounded 50 percent since hitting a
floor in March and crossed the 5,200 level for the first time in
over a year last week on growing optimism about the outlook for
corporate earnings.
MORGAN STANLEY EYED
With the quarterly earnings season under way in the United
States, investors will keep a close eye on results from Morgan
Stanley <MS.N> for signs of recovery in the banking sector.
London Stock Exchange <LSE.L> shed 2.5 percent after Goldman
Sachs cut its rating to "neutral" on valuation grounds and
removed the stock from its Pan-European "Conviction buy" list.
Prudential <PRU.L> fell 2.2 percent. The Financial Times
reported that the life insurer is thought to be conducting a
preliminary assessment of the likely benefits of a separate
listing in Shanghai or Hong Kong.
Within the sector, Aviva <AV.L>, Old Mutual <OML.L> and
Standard Life <SL.L> shed 1.2 to 1.1 percent.
Home Retail <HOME.L> fell 1.3 percent as the retailer met
forecasts with flat first-half profits and said it was planning
cautiously for the future. []
BAE Systems <BAES.L>, BSkyB <BSY.L>, Smiths Group <SMIN.L>
and Whitbread <WTB.L> traded ex-dividend, taking a total of 1.85
points off the index.
On the economic front, the CBI's Industrial Trends for
October showed factory orders weakened at a faster pace than
expected, but manufacturer's outlook for the immediate future
was its brightest since March 2008. []
The Bank of England's Monetary Policy Committee (MPC) voted
unanimously to leave the size of its asset purchase programme
unchanged at 175 billion pounds and interest rates steady at 0.5
percent earlier this month, according to minutes released on
Wednesday. []
(Editing by David Holmes)
