* FTSE 100 down 1.4 percent; budget awaited
* Miners, energy firms, banks retreat
* Some defensives up slightly; Whitbread gains on Q1 sales
By Simon Falush
LONDON, June 22 (Reuters) - Weaker commodity stocks and
banks pushed Britain's top share index lower by midday on
Tuesday as confidence prompted by China's decision to give its
currency more flexibility faded.
There were also nerves ahead of an emergency British budget
which is expected to contain massive spending cuts and tax rises
as worries about sovereign debt levels spread throughout Europe.
By 1033 GMT, the FTSE 100 <> was down 75.90 points, or
1.4 percent lower at 5,223.21, having gained 0.9 percent on
Monday to touch its highest close in a month.
China's decision to allow bigger daily moves in the yuan had
led on Monday to hopes that it would boost China's ability to
buy imported goods, supporting a strong rally in demand
sensitive stocks like miners and oils.
These, however, retreated on Tuesday as scepticism over the
extent of the rise kicked in, with Cairn Energy <CNE.L> and
miner Xstrata <XTA.L>, down 3.7 and 3.2 percent respectively,
among the stand-out losers.
BG Group fell 3.6 percent as Goldman Sachs downgraded its
stance to "neutral" from "buy" on valuation grounds in a
Europe-wide review of the energy sector.
BP <BP.L>, which has tumbled nearly 50 percent since a
massive oil spill started in the Gulf of Mexico in April, fell
2.6 percent.
"The market over-reacted to the China news, we went up on
relatively limited news, and we're going down on limited news,"
Steven Bell director at hedge fund GLC said.
He said the upcoming U.S. earnings season has scope to
disappoint. "The euro-dollar rate could hurt U.S. companies as
they have a large exposure to European markets for their
exports."
The euro <EUR=> has fallen from above $1.50 in December to
around $1.23.
The index had gained for eight of the last nine sessions, as
fears about sovereign debt around Europe faded to the
background, but investors now awaited further clues on corporate
and economic health before taking big positions.
BANKS BRACED FOR BUDGET
Banks fell, with the sector nervous ahead of the impending
emergency British budget, the first by the new coalition
government, which is expected to impose a levy on the sector.
Barclays <BARC.L> fell 3.8 percent, while sector heavyweight
HSBC <HSBA.L> lost 0.1 percent.
British finance minister George Osborne looked set on
Tuesday to also announce big spending cuts and tax rises in what
will be the tightest budget in a generation. []
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For graphics on the British economy, please click on
http://graphics.thomsonreuters.com/10/UK_ECONOMY.html
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As the sovereign debt crisis spreads through Europe, rating
agencies have warned even Britain's triple-A status could be at
risk if the 39-year old Chancellor of the Exchequer's plans to
cut the record deficit are found wanting.
Defensive tobacco stocks and pharmaceuticals were among a
handful of stocks on positive ground as investors rotated back
to stocks perceived as better equipped to weather tougher
economic conditions.
British American Tobacco <BATS.L> added 0.2 percent, while
AstraZeneca <AZN.L> was up 0.1 percent.
But the strongest performer was Whitbread <WTB.L>, up 2.8
percent as the hotel operator said first quarter sales rose 7.6
percent, boosted by a strong performance at its hotel chain
Premier Inn. []
(Graphics by Scott Barber; Editing by Hans Peters)
