UK Stocks -- Factors to watch on Sept 18

LONDON, Sept 18 (Reuters) - Britain's FTSE 100 .FTSE index
is seen opening 2 to 8 points higher on Thursday, financial
bookmakers said, after sinking to its lowest closing level since
May 2005 in the previous session.

The UK benchmark, however, was expected to fare better than
Germany's DAX .GDAXI and France's CAC-40 .FCHI as traders
said the proposed takeover of HBOS HBOS.L by Lloyds would help
ease investor jitters.

"The fact is that one bank in the UK that was at risk of
having serious problems was HBOS. Now the that fact Lloyds is
taking over obviously calm the nerves," said Matthew Buckland, a
dealer at CMC Markets.

A person familiar with the matter said Lloyds has agreed to
buy HBOS to create a 28 billion pound ($50 billion) mortgage
company, making HBOS the latest troubled bank to be forced into
the arms of a better-funded rival. [ID:nLH437309]

Overnight, U.S. stocks dropped to a three-year low as the
U.S. rescue of insurer American International Group (AIG.N)
failed to calm a crisis of confidence in global markets and
banks were wary of lending to each other. In Asia, Japan's
Nikkei average .N225 fell 1.8 percent.

However, the Government of Singapore Investment Corp, the
world's second-largest sovereign fund, said it will explore
investing in Morgan Stanley (MS.N) if it is approached.
[ID:nSGC002284]

A person familiar with the situation told Reuters that
Morgan Stanley has held preliminary takeover talks with Wachovia
Corp WB.N. [ID:nN17405535]

Also, Washington Mutual WM.N has put itself up for sale,
sources familiar with the matter said. [ID:nN17200342]

The FTSE 100 closed down 113.2 points, or 2.3 percent at
4,912.4 on Wednesday, extending its losses for the week to 9.3
percent.

Two fund management industry sources said a consortium of
largest UK institutional investors is discussing measures that
might be taken to tackle the impact of short-selling in banking
stocks. [ID:nLH115687]
* Bank fears, AIG fallout drive Wall St sell-off [nN17318386]
* Nikkei at 3-year low, hit by global credit fears [nT52143]
* Dollar drops vs euro and yen on US bank fears [nT48036]
* Oil near $96 on equity rout, US crude stock fall [nSP354592]
* Gold in negative territory as buying withers [nT94409]

UK stocks to watch on Thursday are:

HSBC (HSBA.L)

The London-based bank has been cited as a possible buyer of
U.S. investment bank Morgan Stanley, broadcaster CNBC reported.
[ID:nSP209552]

ROYAL BANK OF SCOTLAND (RBS.L)

Royal Bank of Scotland is facing between $1.5 billion and
$1.8 billion in claims against bankrupt U.S. investment bank
Lehman Brothers LEH.P, an RBS lawyer said in a court hearing
on Wednesday. [ID:nN17517191]

BARCLAYS (BARC.L)

Barclays is one step closer to acquiring Lehman Brothers'
core U.S. business in a $1.75 billion deal, after a U.S. judge
approved bid procedures for the sale on Wednesday.
[ID:nLH589059]

PRUDENTIAL (PRU.L), AVIVA (AV.L)

Prudential and Aviva are among a handful of European
insurers expected to be front-runners in a multibillion-dollar
auction of AIG's prime assets, the Times said.

MISYS MYS.L

The British software group will be forced to find new
lenders to fund its takeover of U.S. software rival Allscript
after the demise of Lehman, which had agreed to lend it 170
million pounds, the Daily Mail said.

BRITISH ENERGY BGY.L

EDF's (EDF.PA) board took no decision on British Energy
BGY.L at a board meeting on Wednesday. [ID:nLH107690]

ROYAL DUTCH SHELL (RDSa.L) (RDSb.L)

The Anglo-Dutch oil firm has reached deals with six
institutes to carry out research into renewable energy sourced
from biomass, Shell Executive Vice-President Graeme Sweeney said
on Wednesday. [ID:nN17287090]

Separately, Bolivia's state-run energy firm YPFB will pay
Shell some $120 million for its 25 percent stake in natural gas
pipeline company Transredes, which the government nationalised
in June, state news agency ABI said on Wednesday.
[ID:nN17297412]

KINGFISHER (KGF.L)

The retailer is due to issue its first half results.

RYANAIR (RYA.L) (RYA.I)

The airline is due to hold its AGM.

INVESTEC (INVP.L)

The investment banking and asset management group is due to
issue its trading update.

TODAY'S UK PAPERS

> Financial Times [PRESS/FT]

> Other business headlines [PRESS/GB]

(Reporting by Dominic Lau)