* FTSE 100 down 0.6 pct
* Shire rises after agreeing takeover by Abbvie
* Barratt Developments hit by broker downgrade
* Shooting down of passenger plane hits global equities
* FTSE 100 Volatility Index rises
LONDON, July 18 (Reuters) - British stocks fell on Friday as investors sought safety after a passenger plane was shot down in Ukraine, reviving fears about the conflict there, while shares in housebuilders underperformed following a broker downgrade.
The blue-chip FTSE 100 index was down by 0.6 percent, or 42.65 points, at 6,695.67 points by the middle of the trading day. Global equities also extended declines from Thursday that were triggered by the loss of the Malaysian airliner with 298 people on board over eastern Ukraine.
Housebuilder Barratt Developments was among the worst-performing FTSE stocks, falling 2.3 percent and dragging down rival Persimmon after brokerage Liberum downgraded its rating on Barratt to "hold" from "buy".
Pharmaceuticals group Shire rose 2 percent, however, after U.S. rival Abbvie agreed a $53 billion deal to take over Shire.
The FTSE 100 Volatility Index rose by 5.4 percent, highlighting investors' nervousness.
"We were buying the dips up until the plane crash. We are now a bit cautious and will not be taking new positions going into the weekend," said Mark Ward, head of trading at Sanlam Securities.
World leaders have demanded an international investigation into the plane crash, which could mark a turning point in the Ukraine crisis if it convinces reluctant Europeans to get behind tougher sanctions on Russia long sought by the United States.
But Novum Securities technical analyst Adrian Slack said the higher returns offered by equities compared to bonds or cash should continue to underpin stock markets.
"The geopolitical situation is quite jittery at the moment, but everybody is looking at the dip as a buying opportunity," Slack said. (Additional reporting by Andrew Winterbottom and Tricia Wright; Editing by Catherine Evans)