* FTSE down 0.4 percent
* Banks, commodities slide on worries over U.S. default
* AB foods rises after Q3 update
LONDON, July 14 Britain's FTSE 100 index traded
lower on Thursday morning, echoing overnight falls in Asia after
a threat to the United States' Aaa Moody's rating.
Moody's ratings agency said after Wall Street closed on
Wednesday it might cut the U.S. rating if lawmakers failed to
agree to raise the country's debt ceiling.
Britain's top share index was down 23.28 points, or
0.4 percent, to 5,883.15 by 0741 GMT, handing back most of the
previous session's 0.6 percent rise.
"It is jitters across the board," said Yusuf Heusen, senior
sales trader at IG Index.
"There is (also) the (euro zone) contagion aspect; there are
worries about Italy -- they have got a bond auction a bit later
on today. Until that is out of the way, risk is off."
U.S. President Barack Obama clashed with Republican
lawmakers on Wednesday at a White House meeting on deficit
reduction that left a deal in question as the clock ticked
toward a debt default.
Miners and integrated oil stocks
fell as doubts over the sustainability of a sluggish global
economic recovery caused investors to look at the demand
Rio Tinto , down 0.5 percent, fared a little better
than its mining peers as Investec reinitiated coverage on the
miner with a "buy" rating.
Bucking the weaker trend was precious metals miner Fresnillo
, up 2.8 percent after posting record second-quarter
silver and gold production and saying it remained on track to
meet full-year output guidance.
Oil services firm Petrofac fell 2.3 percent with
traders citing a downgrade by Barclay Capital to "underweight".
Banks were broadly weaker as their exposure to
the global debt problems continued to weigh on the sector after
Fitch Ratings on Wednesday downgraded Greece deeper into junk
territory, citing the absence of a new and fully funded
"As long as the U.S. debt situation and European sovereign
debt issues continue, we are likely to see increased volatility
to the downside in equities," said Manoj Ladwa, senior trader at
Greece's prime minister, George Papandreou, said the euro
zone and International Monetary Fund must approve a second
bailout for his country quickly to avoid its economic reform
plans collapsing, a German newspaper reported.
Lloyds Banking Group enjoyed some respite, rising
1.5 percent as Goldman Sachs raised its recommendation on the
part state-owned British bank to "buy".
The broker says it was mindful of risks facing the group
but, given the recent share price weakness and the potential for
high steady-state returns and payout ratios, it recommended
investors to "buy".
The world's largest-listed hedge fund firm Man Group
was down 1.7 percent as HSBC cut its recommendation on the
company to "underweight" from "neutral", questioning its outlook
and saying the shares looked fully valued.
On the upside, Associated British Foods jumped 6.1
percent after a third-quarter update, which Investec described
as "decent", although it did not anticipate any changes to its
2011 numbers and remained "happy buyers".
Kingfisher , Europe's biggest home improvements
retailer, rose 0.9 percent and British engine maker Rolls Royce
added 0.6 percent, as JP Morgan raised its
recommendations on the companies to "overweight".
BSkyB climbed 0.4 percent, extending the previous
session's gains after News Corp's withdrew its bid for
the British broadcaster, with Nomura saying the move could pave
the way for a return of cash to shareholders.
No key British data was scheduled for Thursday.
(Editing by Dan Lalor)
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