* FTSE 100 index falls 0.2 percent by midday
* Centrica, SSE extend their sharp declines
* Tui Travel gains on brighter profit outlook
By Atul Prakash
LONDON, Sept 26 Britain's top share index hovered near a two-week low on Thursday, with utility companies coming under further pressure following a pledge by the country's main opposition party to freeze energy and gas prices if elected in 2015.
Utilities Centrica and SSE extended their losses after opposition Labour leader Ed Miliband revealed his plan earlier this week to freeze energy prices until 2017 to help consumers hit by rising prices.
Centrica fell 2.2 percent, the biggest decliner on the FTSE 100 and after dropping 5.3 percent a day earlier, with JP Morgan cutting its stance on the stock to "neutral" from "overweight". SSE fell 1.8 percent after slipping 5.8 percent on Wednesday.
"The Labour announcement is negative for the profitability of these companies. Yesterday may have been a case of fast money coming out and today may be long-onlys exiting from potentially a medium-term problematic sector, given the uncertainty that has been created," Macquarie strategist Daniel McCormack said.
"The market is struggling, but it's temporary. The earnings will come through and guidance will improve. (The stock market) will push higher into the year-end, probably by another 5 percent or so."
By 1046 GMT, the FTSE 100 index was down 12.30 points, or 0.2 percent, at 6,539.23, after falling to a two-week low the previous day, as concerns of debt wranglings and stimulus uncertainty in the United States continued to hurt sentiment.
European markets have been struggling to regain their recent multi-year highs since Federal Reserve Chairman Ben Bernanke surprised the market by not trimming stimulus last week and left investors guessing about the timing of such a move.
Investors are also avoiding strong bets as the U.S. Congress is struggling to pass a spending bill to keep the government funded beyond Oct. 1. U.S. lawmakers must also raise the federal borrowing limit by Oct. 17 to avoid a debt default by the United States.
"It is difficult to second guess Bernanke but we need to be alive to the fact that yields are rising and tapering will occur at some point," Nick Mustoe, Chief Investment officer of the global equity income fund at Invesco, said.
Mustoe said he still saw value in stocks, with the core of his portfolio in consumer discretionary, which have been the biggest outperformers since 2010, and in pharmaceuticals.
FTSE losses were capped by bullish updates from some of the largest global companies.
Tui Travel, the world's largest tour operator, rose 1.7 percent after it increased the profit outlook it gave only seven weeks ago, while Compass, the world's biggest caterer, climbed 1.1 percent after saying it expected revenue growth of 4.5 percent for the full-year. (Additional reporting by David Brett; Editing by Pravin Char)