* FTSE 100 down 0.2 pct, hits lowest since mid-October
* Standard Chartered sinks after warning of weaker profits
* Investors hedge equity risk through December after strong 2013
By Toni Vorobyova
LONDON, Dec 4 (Reuters) - Britain's FTSE 100 slipped to seven-week lows on Wednesday, weighed down by a surprise warning from Standard Chartered that it could be headed for its first drop in profits in a decade.
Shares in the Asia-focused bank fell 6.4 percent, hitting 16-month lows, after it said overall results will be hit by losses in Korea. By mid-session, volumes were already more than double their 90-day daily average.
"Standard Chartered was extremely disappointing, and I think the banking sector is going to be under a bit more of a review now," said Trevor Coote, the head of equity sales at Alexander David Securities. "It has fallen nearly a pound today on this news. Their statement about difficult markets sums it all up."
The steep drop in Standard Chartered alone took 6.9 points off the FTSE 100. Companies trading without entitlement to the latest dividend - including National Grid and Aberdeen Asset Management - together took off another 3.88 points off the index.
Losses on the broad index were limited by an 8.9 percent rally in Sage. Shares in the software developer jumped to 12-year highs after it posted a sharp rise in take-up for its "cloud" computing products and raised hopes of a further cash return to shareholders.
By 1141 GMT, the British benchmark was down 12.49 points, or 0.2 percent at 6,519.94 points, testing levels last seen in mid-October. That took its losses so far this week to 1.9 percent, on track for its biggest three-day drop since August.
The retreat has disappointed investors who had been banking on a rise in the index this month in a so-called Santa rally - a trend which has seen the FTSE 100 rise in all but two of the last 20 Decembers, according to Datastream data.
However, this time, with the FTSE 100 already up 10.6 percent in 2013 - more than in any of the previous three years - - investors are in a more cautious mood.
"This year has been a lot better than most people would have expected," said Michael Stanes, investment director at Heartwood. "Overall, we remain positive, but we have to admit that we have travelled quite a long way.
"We've hedged as much as a third of our equity risk in some of our strategies to the end of December ... really because we felt that the year has been very strong, some of the indicators were quite bullish and the price of hedging was almost zero. "