FTSE slips as N.Korea missiles spook investors

* North Korea missile launches worries investors

* Energy stocks slip as crude price falls

* Banks fall; defensive tobaccos, supermarkets rise

By Simon Falush

LONDON, May 26 (Reuters) - Britain's FTSE 100 .FTSE was down 1.5 percent by midday on Tuesday, with reports that North Korea had launched missiles unnerving markets, hitting risk-sensitive banks and denting oil and metal prices and commodity stocks. By 1046 GMT the FTSE 100 .FTSE was down 64.56 points at 4,300.73 in thin trading after gaining 0.5 percent on Friday. The index is down 3 percent this year, but has gained over 24 percent since touching a six-year trough on March 9.

North Korea, criticised for its latest nuclear test, fired two more short-range missiles off its east coast on Tuesday and accused the United States of plotting against its government. [ID:nSEO205060]

This news, combined with an OPEC oil producers' meeting later in the week which is expected to keep output unchanged, pushed the price of crude oil down nearly $2 to below $60 per barrel, hitting energy stocks.

BP (BP.L), Royal Dutch Shell (RDSa.L), BG Group (BG.L), Tullow Oil (TLW.L) and Cairn Energy (CNE.L) fell between 0.7 and 3.9 percent.

Miners slid, tracking weaker metal prices. Anglo American (AAL.L), Lonmin (LMI.L), Rio Tinto (RIO.L) and Xstrata (XTA.L) fell 2.9-3.6 percent.

"Energy and commodity stocks ... are vulnerable to a pull- back, particularly if the outlook for world economic growth is being questioned again," said Paul Kavanagh, equities analyst at Killik & Co.

BANKS SLIDE

Banks, which also tend to suffer as risk aversion increases, were also broadly weaker with Barclays (BARC.L) and Lloyds Banking Group (LLOY.L) down 2.5 and 5.3 percent respectively despite upgrades from Oriel.

Standard Chartered lost 3.6 percent, and HSBC (HSBA.L) fell 2.6 percent. Oriel cut HSBC to "add" from "buy".

On the domestic front, retiring Bank of England policymaker David Blanchflower said he feared his colleagues could quash any economic recovery by tightening monetary policy too soon, in comments reported in the Sunday Telegraph. The London market was closed on Monday for a public holiday. [ID:nLO680916]