* FTSE 100 flat by midday
* Lonmin jumps after rival Xstrata launches bid
* Old Mutual falls after U.S. disappointment
By Dominic Lau
LONDON, Aug 6 (Reuters) - Britain's leading share index was
flat by midday on Wednesday as Xstrata's <XTA.L> $10 billion bid
for rival Lonmin <LMI.L> lifted miners, while Old Mutual <OML.L>
led insurers lower after first-half earnings.
By 1027 GMT, the FTSE 100 <> was down 1.6 points, or
0.02 percent, at 5,452.9, after rallying 2.5 percent on Tuesday.
The UK benchmark is down 15 percent for the year.
"In the short term, investors will be concerned about the
extent to which the economic slowdown will harm corporate
profitability," said Henk Potts, equity strategist at Barclays
Stockbrokers. "Investors realise that some sectors have been
aggressively oversold and that creates opportunity."
"From a corporate perspective, expectations of organic
growth will be harder to find and therefore, increasingly
companies will be looking to merger and acquisition activity to
try to replace that," he said, adding that valuations were low.
Lonmin surged 47 percent after Xstrata launched a takeover
bid for the world's third-biggest platinum producer to further
diversify its business from industrial metals such as copper.
South Africa-focused Lonmin, however, rejected the bid.
Xstrata advanced 1.8 percent, while BHP Billiton <BLT.L>,
Rio Tinto <RIO.L>, Anglo American <AAL.L>, Antofagasta <ANTO.L>
and Vedanta Resources <VED.L> strengthened 2.3 to 4.5 percent.
Eurasian Natural Resources <ENRC.L> added 3.4 percent after
the Kazakh miner said its second-quarter production volumes rose
compared with the same time last year.
Energy stocks also gained as crude prices <CLc1> edged above
$119 a barrel. BP <BP.L>, BG Group <BG.L> and Cairn Energy
<CNE.L> were up 1.3 to 3.8 percent.
Royal Dutch Shell <RDSa.L> <RDSb.L> were down after going
ex-dividend, as were AstraZeneca <AZN.L>, British American
Tobacco <BATS.L>, Reckitt Benckiser <RB.L>, Lloyds TSB <LLOY.L>
and Reed Elsevier <REL.L>.
The Bank of England is expected to keep interest rates at 5
percent when it announces its decision on Thursday.
On Tuesday the U.S. Federal Reserve left benchmark lending
rates unchanged at 2 percent as expected, and its accompanying
statement soothed investors who had worried that inflation would
force the central bank to raise borrowing costs in coming
months.
FINANCIAL DAMPERS
Financials were the biggest sectoral losers after Old Mutual
<OML.L> posted a 3 percent rise in first-half profit, as growth
was held back by the weak rand, turbulent markets and an
injection to strengthen reserves at its U.S. unit.
[]
Old Mutual lost 7.2 percent, while Standard Life <SL.L> fell
5.1 percent after the insurer posted a 51 percent rise in
first-half profit, boosted by one-off gains from a deal to
reinsure annuity liabilities and reduce the financial risk posed
by Britons living longer. []
Within the insurance sector, Prudential <PRU.L>, Friends
Provident <FP.L> and Legal & General <LGEN.L>, whose shares
gained 12 percent on Tuesday, were down 1.7 to 5 percent.
Banks were also generally weaker, with HSBC <HSBA.L> down
0.9 percent and HBOS <HBOS.L> losing 0.2 percent.
Freddie Mac <FRE.N>, the second-biggest provider of U.S.
residential mortgage funding, posted its fourth consecutive
quarterly loss and set plans to slash its common stock dividend
amid the steepest U.S. housing market slump since the Great
Depression.
ITV <ITV.L> slumped 8.9 percent after Britain's biggest
free-to-air commercial broadcaster said its net advertising
revenues were flat in the first eight months and cut some
mid-term targets in light of economic uncertainty.
Liberty International <LII.L> shed 5.6 percent after the
shopping mall owner reported a 7.4 percent fall in the value of
its assets and warned the property market would not recover
until the banking sector stabilised.
Peers Hammerson <HMSO.L>, Land Securities <LAND.L> and
British Land <BLND.L> were also down.
(Additional reporting by Atul Prakash; Editing by Erica
Billingham)
