FTSE falls as double-dip fears linger

Fri Aug 20, 2010 11:58am EDT

* FTSE down 0.3 pct on double-dip fears, light volumes

* Banks fall as risk appetite wanes

* Miners down with commodity prices

By David Brett

LONDON, Aug 20 (Reuters) - Banks and miners led Britain's top share index lower on Friday as nagging worries over the sustainability of the economic recovery and lighter-than-usual turnover weighed on the FTSE.

The FTSE 100 .FTSE closed down 16.01 points or 0.3 percent at 5,195.28, its lowest close since July 20, having ended 1.7 percent lower on Thursday.

Banks fell as appetite for risk remained suppressed after Thursday's data showing new U.S. jobless claims scaled a nine-month high dented confidence. [ID:nN19350083]

Barclays (BARC.L) dropped 0.6 percent and Royal Bank of Scotland (RBS.L) was down 2.3 percent.

"In the absence of any economic data to turn sentiment around ... concerns about a double-dip recession in the U.S. continued to dominate," Michael Hewson, market analyst at CMC Markets said.

Building supplies group Wolseley (WOS.L), which gets a large proportion of its revenue from the United States, was among the top fallers, down 3.3 percent.

London's blue chips, which have shed 1.3 percent this week -- their second consecutive weekly fall -- traded just 68 percent of their average 90-day volumes on Friday.

"We are now deep into the main holiday month which means that there are minimal volumes in the market," Joshua Raymond, Market Strategist at City Index said.

"As a result, many moves are being overly exacerbated."

Raymond said the FTSE needed to stay above the near-term support level of 5,178, where he has seen clients leave a number of buy orders hoping to capitalise on any small recovery. A fall below there could take the UK Index down to 5,104.

MINERS FALL

Mining stocks were also mostly lower, dragged down by commodity prices.

Eurasian Natural Resources ENRC.L slipped 2.0 percent after Citigroup cut the stock to "hold" from "buy" on valuation grounds.

Energy shares were higher, helped by BG Group (BG.L), which rose 6.0 percent. Traders pointed to the Daily Mail's market report which reported speculation that Royal Dutch Shell (RDSa.L) is considering a takeover bid of the gas producer. [ID:nLDE67J0AE]

Among midcaps, Dana Petroleum DNX.L added 6.1 percent after state-run Korea National Oil Corp (KNOC) made a hostile $2.9 billion cash bid for the company. [ID:nTOE67J00I]

"We are having one of the busiest M&A months of August for a very long time as companies have got a lot of cash that they don't know what to do with ... as anything looks good value, people are looking to buy it up," said David Buik, senior partner at BGC Partners.

Cairn Energy (CNE.L), also involved in M&A activity, added 0.2 percent.

India's oil minister Murli Deora said his ministry has sought details on the proposed acquisition of a majority stake by Vedanta (VED.L) in Cairn India (CAIL.BO), the local arm of Britain's Cairn Energy. Vedanta fell 1.5 percent.

Inmarsat (ISA.L), which jumped on Wednesday after activating a deal with U.S. peer LightSquared continued to pare gains, falling 2.6 percent. (Editing by Louise Heavens)

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