* FTSE 100 down 1.3 percent
* Banks fall; weak data adds to negative tone
* Resources stocks hit by lower metal, energy prices
* Defensive pharmaceuticals, tobacco, beverages gain
By Simon Falush
LONDON, Sept 1 (Reuters) - Sagging bank and commodity stocks
dragged Britain's top share index down 1.3 percent by midday on
Tuesday as doubts about the summer's strong rally began to
appear.
At 1032 GMT, the FTSE 100 <> was down 63.68 points at
4,845.22, after closing up 0.8 percent at 4,908.90 on Friday,
having also touched a near 11-month high of 4,944.16 earlier in
the session.
Cyclical stocks, more sensitive to resurfacing fears on the
global economy were hurt as the reaction to a sharp sell-off in
Chinese equities on Monday filtered through to a UK market that
was closed for a public holiday that session.
"China is very volatile and it got clobbered on the last day
of the month... and that's what's causing the angst, with a move
to a sense that the markets might be overbought," said Philip
Lawlor, chief portfolio strategist at Nomura.
Banks were the biggest drag on the index, with Lloyds
Banking Group <LLOY.L> down 4.5 percent.
The Financial Times reported that the UK government had
reached a 1 billion pound ($1.62 billion) deal to enhance the
bank's business lending. []
Barclays <BARC.L>, HSBC <HSBA.L> and Royal Bank of Scotland
<RBS.L> fell between 2.9 and 3.9 percent.
Also among the financials, RSA Insurance Group <RSA.L> was
the top blue-chip faller, down 3.4 percent after reports in the
Sunday newspapers that it was considering a rights issue of up
to 600 million pounds.
Weak data reinforced the more negative tone at the start of
the month with Britain's manufacturing sector dipping
unexpectedly in August [] and net lending to
Britons falling at its sharpest rate since records began in
1993. []
Commodity stocks were weakened by softer metal and crude
prices.
Xstrata <XTA.L>, Lonmin <LMI.L>, Anglo American <AAL.L> and
Kazakhmys <KAZ.L> fell between 3.3 and 4.2 percent.
BP <BP.L>, Royal Dutch Shell <RDSa.L> and Cairn Energy
<CNE.L> fell between 0.9 and 3.1 percent.
DRUGMAKERS HIGHER
Pharmaceuticals stocks added most to the index, with
AstraZeneca <AZN.L> up 1.5 percent, boosted by impressive trial
results for experimental blood thinner Brilinta, and as Goldman
Sachs raised its share price target for the company.
GlaxoSmithKline <GSK.L> and Shire <SHP.L> gained 0.4 and 1.0
percent, respectively.
Britain's blue-chip index gained 6.5 percent in August and
is up 40.2 percent since hitting its lowest level in more than
six years in March. However, investors started September in a
cautious mood.
"Investors will take a long hard look at the rally over
August, and when we see a move back to risk aversion, there's a
move back into defensives," said Richard Hunter, head of
equities at Hargreaves Lansdown.
Tobacco and beverage stocks were also in demand as investors
homed in on stocks they expect to hold firm in a still
challenging economic environment.
British American Tobacco <BATS.L> added 1.2 percent while
Diageo <DGE.L> added 1.5 percent.
(Reporting by Simon Falush; editing by Karen Foster)
