* Blue-chip FTSE 100 index falls 0.6 percent
* Miners, banks feature among top decliners
* Babcock International slips on rights issue
By Atul Prakash
LONDON, March 27 Britain's top stock index fell
on Thursday, with miners leading the retreat on lingering
concerns their earnings could be hurt by weaker metals prices
following a growth slowdown in China and improving supplies.
Banking shares also lost some ground after the Federal
Reserve blocked the U.S. units of Royal Bank of Scotland
and HSBC from paying higher dividends or buying back
their own shares, citing weaknesses in their capital
The two heavyweight sectors took the most points off the
blue-chip FTSE 100 index, which fell 0.6 percent to
6,567.01 points by 1208 GMT and is down 3.4 percent this month.
The UK mining index dropped 1.5 percent, the
top sectoral decliner, and took the total losses this month to
nearly six percent on concerns that earnings of mining companies
might disappoint in coming quarters due to pressure on prices of
"The outlook for commodity prices has changed quite
substantially as the supercycle that we saw in China is coming
to an end," Henk Potts, strategist at Barclays Wealth, said.
"There has been a huge amount of investment in the mining
sector during the boom years and that supply is just about to
come through at a time when demand has been slowing down."
Prices of aluminum, nickel and gold
fell 0.3 to 1.1 percent, putting pressure on precious metals
miner Fresnillo, down 3.7 percent, and on Randgold
Resources, down 2.6 percent.
Rio Tinto fell 1.8 percent, while BHP Billiton
was down 0.7 percent.
Financials were the second-biggest drag on the market after
miners, with the UK banking index down 0.6 percent.
Royal Bank of Scotland and HSBC were down 1.6 percent and
0.7 percent respectively following the Fed's rejection of their
request for higher dividends.
Foreign banks will have to wall off their U.S. units and
meet tougher capital requirements under the Fed rules.
However, some traders said discussions about the U.S. stress
tests were not over, so the banks could get off more lightly.
"It's a watching brief for UK banks ... but with any further
downside they're likely to attract buyers," said Matt Basi, head
of sales trading at CMC Markets.
"All of these things are done by negotiation, so it's not a
case of HSBC and RBS making a proposal, the Fed saying no, and
that being the end of it. It's a back-and-forth process, and we
expect there to be a resolution at some stage in the near-term."
The sector also came into focus after the Bank of England
urged banks to consider the risk of future spikes in interest
rates when approving mortgages, and prepared tools to rein back
potentially dangerous lending.
Among individual sharp movers, UK defence support and
engineering services group Babcock International fell
5.9 percent to the bottom of the FTSE 100 index.
It said on Thursday it has agreed to acquire helicopter
transport services firm Avincis for 920 million pounds ($1.5
billion) plus debt, funding the deal with a 1.1 billion-pound
(Additional reporting by Tricia Wright; Editing by Sophie