September 2, 2011 / 11:16 AM / in 8 years

REFILE-FTSE retreats ahead of U.S. jobs data

(Corrects typo in paragraph 3)

* FTSE down 2 pct ahead of U.S. non-farm jobs data

* Banks, miners and oils all fall as investors flee risk

* Food retailers slide, Citigroup cuts Morrison’s rating

By David Brett

LONDON, Sept 2 (Reuters) - Banks and commodity stocks dragged Britain’s top share index lower by midday on Friday, as investors reverted to risk-off mode following three days of gains, ahead of U.S. jobs data.

August U.S. non-farm payrolls, due out at 1230 GMT, were forecast to have risen 75,000, after a 117,000 increase in July, with the unemployment rate seen static at 9.1 percent, although there were worries the actual figure could undershoot these forecasts.

“Some estimates are now more slanted towards the 25,000 mark. Traders should not discount the potential for there to be a negative number either,” Giles Watts, head of equities at City Index, said.

“Considering that the actual figure could have a big bearing on what the Fed do at their September FOMC meeting and the fact that various estimates for payrolls have been downgraded throughout the week, there is a sense of heightened tension in the markets.”

London’s blue-chip index was down 107.02 points at 5,311.63, or 2 percent by 1055 GMT, while U.S. stock index futures pointed to a lower open on Wall Street on Friday, on concerns the key labor market report could still show signs the U.S. economy was falling into recession.

Heightening worries ahead of the data, the White House, already struggling to turn around the high U.S. unemployment rate, cut its economic growth outlook for the next two years.

Riskier equities bore the brunt of selling as Barclays led the banking sector lower, surrendering most of its previous session’s gains, falling 4.4 percent.

Integrated oils fell too with the added concern that a storm brewing offshore in the Gulf of Mexico could disrupt production for major oil and gas producers.

Miners , the main thrust behind the index’s recent gains, also lost ground, hurt as Thursday’s data showed growth in the world’s global manufacturing sector all but disappeared in August, and weak export orders from big metal consumer China.

Andy Ash, head of sales at Monument Securities, said fundamental concerns about the global economy remain and that is reflected in the pricing of other asset classes.

“The recent rally was just a technical rally. If you look at some of the bond spreads, the Italian bond has moved from 5.10 and has been out to 5.23 today, so all the concerns that were there are still there,” he said.

Gold, a historical safe haven, began its march again towards the $1,900 an ounce level. That helped Randgold Resources rally 1.3 percent after recent falls, as investors bought the gold miner as a proxy for the precious metal.

Elsewhere UK food retailers were weaker, led by Wm Morrison , down 1.4 percent as Citigroup downgraded its rating to “hold” from “buy” as part of a review in which it recommends avoiding the sector.

“The cosy, consolidated UK food retail market is destined to turn ugly if the economy shuffles sideways Japan-style and capacity growth plans roll on as planned,” the broker said in a note.

Morrison’s next trading update is due out on Thursday.

Firms under threat from demotion to the FTSE 250 when the quarterly review takes place next week, endured a mixed session with 3I Group down 4.3 percent, while Inmarsat was one of the few risers, up 0.5 percent. (Additional reporting by Simon Jessop; Editing by Jon Loades-Carter)

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