By Dominic Lau
LONDON, April 10 (Reuters) - Britain's top share index fell
0.7 percent by late morning on Thursday ahead of the Bank of
England's interest rate decision and dragged by banks after
Lehman Brothers <LEH.N> said it had liquidated three of its
funds.
By 0955 GMT, the FTSE 100 <> was down 38.7 points at
5,945.2, also weighed by miners on worries about economic
growth.
"The BoE is being overshadowed by a combination of rumours
to the downside with the potential of more writedowns ... and
apparently Lehman liquidating some funds," said Martin Slaney,
head of derivatives at GFT Global Markets.
"You've got oil higher now, back up again. Put it altogether
it has been a rapid drift to the downside," he said.
Miners were the biggest drag on the index after BHP Billiton
<BLT.L> said it was not aware of any plan by China to buy a
stake in the company, while the Australian government said it
would look closely at any moves by Chinese entities to buy
shares in BHP. The world's biggest miner fell 4.4 percent.
Elsewhere in the mining sector, Rio Tinto <RIO.L>, Lonmin
<LMI.L>, Kazakhmys <KAZ.L>, Xstrata <XTA.L>, Anglo American
<AAL.L> and Vedanta Resources <VED.L> were down between 1.7 and
3.3 percent.
Banks were another standout loser, with Barclays <BARC.L>,
Royal Bank of Scotland <RBS.L>, Alliance & Leicester <ALLL.L>,
HBOS <HBOS.L>, HSBC <HSBA.L> and Lloyds TSB <LLOY.L> all down
between 0.4 and 3 percent.
Lehman Brothers has liquidated three floundering investment
funds that lost value and ended up taking $1 billion of assets
onto its balance sheet, according to a filing with the
Securities and Exchange Commission.
The Bank of England is widely expected to cut interest rates
by a quarter of a percentage point to 5.00 percent when it
announces its decision at 1100 GMT.
The European Central Bank is expected to leave interest
rates unchanged at 4.00 percent at 1145 GMT.
Oil shares offered some support as crude prices <CLc1> edged
towards $112 a barrel. Index heavyweight BP <BP.L> advanced 0.6
percent, while Royal Dutch Shell <RDSa.L> added 0.4 percent and
Cairn Energy <CNE.L> put on 1.9 percent.
M&A SUPPORTS
British Energy <BGY.L> rose 4.5 percent after a source close
to the matter said German utility RWE <RWEG.DE> had made an
indicative all-cash offer for British Energy, which values the
UK nuclear power operator at up to 11 billion pounds.
Another source said Centrica <CNA.L> had made an indicative
all-share bid for British Energy, with the offer being pitched
at under 700 pence a share.
British Energy, RWE and Centrica, whose shares added 0.3
percent, all declined to comment.
In other related M&A news, mid-cap Enodis <ENO.L> jumped
more than 48 percent to 224.75 pence after U.S. Manitowoc Co Inc
<MTW.N> confirmed it had approached Enodis about a possible cash
offer valuing the UK company at 260 pence per share.
Mitchells & Butlers <MAB.L> gained 1.7 percent after the
Times said private equity firms CVC Capital Partners and
Blackstone <BX.N> had made a joint bid to buy a stake of up to
29.9 percent in the restaurant and pub firm.
DSG International <DSGI.L> however, shed more than 9 percent
after the pan-European electrical goods retailer issued its
second profit warning in three months, saying it was
increasingly having to cut prices to maintain sales.
(Additional reporting by Rebekah Curtis; Editing by Erica
Billingham)
