FTSE Falls On Weaker Miners, Struggling Banks

By 0840 GMT, the commodity-heavy FTSE 100 was down 5.8 points, or 0.1 percent.

Britain's blue-chip share index fell to its lowest in over five months on Thursday, weighed down by mining stocks, which fell as metal prices softened, and by embattled banks.

By 0840 GMT, the commodity-heavy FTSE 100 was down 5.8 points, or 0.1 percent, at 5,420.5, after losing nearly 1 percent in the previous session.

Record-high crude oil prices continued to deepen inflation concerns and threatened to drag on global economic growth, analysts said, adding investors remained cautious towards investing heavily in equities.

"It's just really bad sentiment at the moment, which is driving the market lower. There is a bit of nervousness over the data that is due out today," said Angus Campbell, head of sales at Capital Spreads.

"Inflation is affecting the consumers. They are struggling."

Data showed this week euro zone inflation jumped to a record 4.0 percent year-on-year in June, more than double the European Central Bank's target of just under 2 percent, underscoring market expectations for the ECB to raise interest rates on Thursday to 4.25 percent from 4 percent.

Investors awaited the release of U.S. non-farm payrolls data later in the day. Economists expect a loss of 60,000 against 49,000 jobs lost in May.

British data showed the UK services sector shrank at its fastest pace since the aftermath of the September 11 attacks on the United States in 2001, highlighting the economic slowdown.

Miners were the biggest losers on the FTSE 100 as metals prices weakened. Anglo American, Vedanta Resources and Xstrata fell between 0.6 and 2.4 percent.

Miner BHP Billiton said that United States antitrust authorities had cleared its unsolicited $170 billion bid for rival miner Rio Tinto. But shares of both the companies were down about 2 percent, tracking the broader market trend.

Banks slipped on poor sentiment and worries over more losses. HSBC, Lloyds TSB, Alliance & Leicester and Standard Chartered fell between 0.3 and 2.1 percent.

OIL STOCKS WEAKEN

Energy stocks also slipped despite crude prices above $144 a barrel, as a higher-than-expected fall in U.S. crude stocks raised supply concerns.

"Markets as a whole remain highly sensitive to crude, so we could be in for a rather choppy ride mid-session," Paul Webb, chief dealer at CMC Markets, said in a note.

BP, gas producer BG Group and Tullow Oil shed between 0.4 and 1.1 percent.

British engineer and project manager AMEC rose 5.4 percent after it said its markets and trading performance remained strong, giving it increased confidence in its 2008 outlook. It also raised its margin expectations for the year to 6.5 percent from its previous 6 percent target.

WPP Group, the world's second-largest advertising group, fell 3.4 percent after British marketing research firm Taylor Nelson Sofres rejected an improved $2.14 billion approach from the company.