FTSE ends down on banks, commodities

LONDON (Reuters) - The blue chip share index ended down 0.6 percent on Thursday, led by banks after a trading update from Standard Chartered (STAN.L) failed to excite investors while commodity stocks were also under pressure.

The FTSE 100 .FTSE closed down 27.41 points at 4,252.57, after gaining 1.2 percent in the previous session. Volumes on the UK index were about three quarters of its 90-day average.

Banks shaved most points off the index after Asia-focussed Standard Chartered said it remained cautious on its outlook, with consumer banking income for the first half expected to be lower than the previous six months and bad debts rising sharply in the division.

Standard Chartered stock lost 2.3 percent, while HSBC (HSBA.L), which also has a large presence in Asia, dropped 2.4 percent. Lloyds Banking Group (LLOY.L) and Barclays (BARC.L) gave up 0.4 and 1.6 percent respectively.

Royal Bank of Scotland (RBS.L), however, added 3.4 percent after Cazenove raised its rating on the bank to "outperform" from "underperform."

The U.S. economy shrank slightly less in early 2009 than previously thought, though there was widespread weakness in activity and demand was soft.

Also, the number of workers filing new claims for jobless benefits unexpectedly rose last week by 15,000 to a seasonally adjusted 627,000 -- a measure of the strain still faced by hard-pressed consumers.

"It's going to be a very rocky time for investors. It will confirm our long held view that over the course of the last few months, the market has just gone too far ahead of itself," said Peter Dixon, UK economist at Commerzbank.

"The labour market could be one of the factors which over the course of the next few months limit the rise of the market."

Meanwhile, a Reuters poll showed UK house prices had further to fall but would bottom out inside a year as economists grew more optimistic about a faster upturn with interest rates remaining at record lows.

COMMODITIES FALL

Commodity stocks were other standout losers on the UK index, with BP (BP.L), Royal Dutch Shell (RDSa.L), Xstrata (XTA.L), BHP Billiton (BLT.L) and Rio Tinto (RIO.L) down between 0.2 and 2.4 percent.

Tullow Oil (TLW.L) bucked the trend, up 2.1 percent with traders pointing to speculative interest following recent takeover deals for oil explorers, notably its Ugandan field partner Heritage Oil (HOIL.L).

Index heavyweight Vodafone (VOD.L) fell 1.3 percent after Goldman Sachs removed the mobile phone operator from its "conviction buy list" and downgraded the European telecoms sector to "neutral" from "attractive."

BT Group (BT.L) and Cable & Wireless (CW.L) both lost 0.4 percent.

On the upside, Standard Life (SL.L) advanced 2.4 percent after Banc of America-Merrill Lynch upgraded its rating on the life insurer to "buy" from "neutral."

International Power (IPR.L) and Scottish & Southern Energy (SSE.L) were also in demand, both up 1.4 percent.

(Editing by Jon Loades-Carter)