* Banks weak, HSBC down on negative broker comment
* Commodity stocks weigh; BG raises Pure Energy bid
* InterContinental Hotels up after results
* Jan UK inflation exceeds forecasts
By Jon Hopkins
LONDON, Feb 17 (Reuters) - Britain's leading share index
fell 2.5 percent by midday on Tuesday, weighed by weakness in
banks and commodity stocks, and expectations for early falls on
Wall Street after data showed UK inflation was higher than
forecast.
By 1156 GMT, the FTSE 100 index was 101.49 points lower at
4,033.26, having fallen 1.3 percent on Monday.
The Office for National Statistics said UK consumer prices
fell 0.7 percent in January. That took the annual rate down to
3.0 percent from 3.1 percent in December, above forecasts for a
rate of 2.7 percent and over the BoE's two percent target.
"With the threat of deflation a very real danger the MPC has
a lot more work to do to keep inflation on target. It is still
high-alert, all hands on deck time," said Rob Pike, head of
trading at spread betting group ShortsandLongs.com.
Also on the data front, UK house prices fell 10.2 percent in
December 2008 compared with a year earlier, the Department for
Communities and Local Government said on Tuesday.
The banking sector was the biggest drag on UK blue chips at
midday, pressured by a 5.3 percent fall from HSBC <HSBA.L> after
some cautious broker comment.
Morgan Stanley, repeating its "underweight" stance on HSBC,
said it was becoming more bearish on the outlook for profits.
Standard Chartered <STAN.L> also dropped, down 7.6 percent,
while Lloyds Banking Group <LLOY.L> extended its recent slide,
losing 6.2 percent, and Barclays <BARC.L> fell 0.9 percent.
Real estate group Land Securities <LAND.L> was the top FTSE
100 faller, down 9.3 percent after confirming on Monday that it
was considering a rights issue.
Other property blue chips also fell, reflecting the gloomy
economic picture, with Hammerson <HMSO.L>, Liberty International
<LII.L>, and British Land <BLND.L> down 4 to 7.9 percent.
Heavyweight energy stocks were under pressure as crude
prices remained below $37 a barrel, with BP <BP.L>, Royal Dutch
Shell <RDSa.L>, and Cairn Energy <CNE.L> down between 0.8 and
3.1 percent.
BG Group <BG.L> shed 1.8 percent as the firm raised its bid
for coal-seam gas explorer Pure Energy Resources by 25 percent
to A$995 million ($646 million) on Tuesday, trumping a rival bid
by Arrow Energy.
MINERS UNDER PRESSURE
Miners were weak as demand concerns continued, with
Kazakhmys <KAZ.L>, Eurasian Natural Resources <ENRC.L>, Xstrata
<XTA.L>, Anglo American <AAL.L> and Vedanta Resources< VED.L>
all down between 3.5 to 6.2 percent.
Major investors in Rio Tinto <RIO.L> <RIO.AX> have poured
scorn on efforts by the mining group to provide explanations of
plans to raise $19.5 billion from state-owned Chinalco,
shareholder sources said on Monday.
Advisers to BHP Billiton have surveyed investors in Rio
Tinto about their support for an alternative to the Chinalco
cash injection, the Financial Times said.
Rio Tinto <RIO.L> fell 1.7 percent and BHP Billiton <BLT.L>
lost 4 percent.
But gold miner Randgold Resources <RRS.L> bucked the sector
trend, up 1 percent as the price of the yellow metal <XAU=> rose
to a seven-month high, buoyed by safe haven buying.
There were only a handful of other blue chip gainers, with
InterContinental Hotels <IHG.L> standing out, up 1.3 percent
after its full year results met forecasts despite strong
headwinds in the sector.
U.S. blue chip futures <DJc1> pointed to a lower start on
Wall Street on Tuesday, as the market reopens after a long
holiday weekend, with investors bracing for quarterly results
from retail behemoth Wal-Mart <WMT.N>.
(Editing by Raji Menon)
