Banks, oils drag FTSE down; miners, retailers up

*FTSE down 0.8 percent, banks weigh on HBOS housing gloom

*Oils weaken as crude prices slip

*Miners track higher metal prices

*Retailers boosted by strong sales data

By Dominic Lau

LONDON, June 19 (Reuters) - Britain's top share index fell 0.8 percent on Thursday as banks sagged on concern over asset quality and oil stocks tracked soft crude prices, though sales data lifted retailers and firmer metal prices supported miners. The commodity-heavy FTSE 100 .FTSE closed down 48.5 points at 5,708.4 in a volatile session. The UK benchmark index has fallen 5.7 percent so far this month, and is down 11.6 percent for the year.

"A report of China going to cut subsidies on gasoline and diesel has bought oil off and taken FTSE 100 down with it," said Martin Slaney, head of derivatives at GFT Global Markets. Crude prices CLc1 eased on news that China will raise retail gasoline and diesel prices for the first time in 8 months, which will curb demand in world's second largest energy consumer. Heavyweights Royal Dutch Shell (RDSa.L) and BP (BP.L) fell 1.4 and 1.6 percent, respectively.

Banks were the biggest losing sector after Britain's largest mortgage lender, HBOS HBOS.L, warned that higher writedowns would hit first-half performance as a sharper fall in house prices put pressure on bad debts, even though it confirmed it was trading in line with expectations. [ID:nL19713810]

The poor quality of bank assets and concerns about an ailing housing market dragged banks down across the board.

"The credit quality is the issue (in the HBOS statement). The cautions on margin recovery for next year and beyond ... The statement reads incredibly in line but that still doesn't take away the fundamentals of the sector," a trader said.

HBOS shed 6.9 percent, while Royal Bank of Scotland (RBS.L), Barclays (BARC.L), Alliance & Leicester ALLL.L, HSBC (HSBA.L), Standard Chartered (STAN.L) and Lloyds TSB (LLOY.L) were down between 1.4 and 5.7 percent. Miners lent some support, aided by the rise in metal prices. BHP Billiton (BLT.L), Anglo American (AAL.L), Xstrata (XTA.L) and Eurasian Natural Resources (ENRC.L) were up between 0.2 and 3.5 percent.

RETAIL THERAPY?

Retailers were also in demand after British retail sales unexpectedly soared in May, rising at their fastest monthly rate since the series began in 1986. [ID:nL19708461]

Next (NXT.L), Marks & Spencer (MKS.L), Tesco (TSCO.L) and Home Retail (HOME.L) put on 0.2 to 1.5 percent, having pared earlier gains as the optimism about the data faded.

"I don't think there is any long-term read into (the May retail sales figures). The tide is still down," another trader said, referring to the outlook.

Transport stocks were boosted after bus and train operator Go-Ahead Group (GOG.L) said it expects a strong full-year performance driven by revenue growth and excellent train performance.

FTSE 250-listed Go-Ahead surged 12.1 percent while rival operator FirstGroup (FGP.L) rose 2.1 percent, putting it among the top gainers on the blue chip index.

A toxic combination of high inflation and slowing growth has been weighing on the housing market, denting housebuilding stocks.

Persimmon (PSN.L) fell 3.8 percent, Barratt Developments (BDEV.L) lost 2.8 percent and Taylor Wimpey (TW.L) dropped 2.2 percent. But Redrow (RDW.L) jumped 12 percent after Citi upgraded the stock to "buy" from "sell".

Thomson Reuters TRIL.L shed 4.8 percent after broker Collins Stewart issued a downbeat note on the global news and information company, traders said. (Additional reporting by Simon Falush; Editing by Quentin Bryar)