FTSE falls early on weak oils and HBOS; miners rise

Mon Jul 21, 2008 3:40am EDT

* FTSE 100 falls 0.6 pct

* HBOS slips after announcing rights issue results

* Oils the standout losers as crude trades well off highs

* Miners track firmer metal prices

By Dominic Lau

LONDON, July 21 (Reuters) - Britain's top share index fell early on Monday, giving up some of the previous session's sharp gains, after a disappointing take-up of HBOS's rights issue and as oil shares weighed with crude trading well off record highs.

By 0724 GMT, the FTSE 100 .FTSE was down 32.9 points, or 0.6 percent, at 5,343.5, after closing up 1.7 percent on Friday, marking its first weekly increase in nine weeks and the end of the longest losing stretch since late May 2002.

"There is a realisation that people behaving like ostriches are going to have to take their heads out of the sand. We've got an issue here -- it is called falling growth and is called heading towards recession...That's the sentiment play," said David Buik, strategist at BGC Partners.
"The HBOS thing is ... tragic and very unlucky. You cannot have a two-month gap before announcing the rights and implementing it, especially when the market is very, very brittle and extremely volatile."

HBOS fell 3.2 percent after the mortgage lender said shareholders subscribed to buy just 8.3 percent of shares in its 4 billion pound ($8 billion) rights issue, leaving its underwriters to try to sell almost 3.8 billion pounds of shares.
HSBC , however, advanced 0.8 percent after the Sunday Telegraph said the global banking group had held talks with China's sovereign wealth fund over a potential investment in HSBC.

Within the banking sector, Barclays , Lloyds TSB and Standard Chartered shed 0.4 to 1.3 percent.

The British economy is heading into recession and interest rates should fall to "well below" their current 5 percent, Bank of England policymaker David Blanchflower was quoted as saying in a newspaper interview.
A survey by property website Rightmove showed asking prices for homes in England and Wales fell two percent year-on-year in July, the first annual fall since the series began six years ago.

Retailers and property stocks were down, with Marks & Spencer , Land Securities , British Land , Next , Sainsbury , Tesco and Kingfisher dropping 1.7 to 3.7 percent.

Investors will shift their attention to results from Bank of America , Apple and Merck & Co later in the day for further market direction.

Oil shares slipped after crude prices CLc1 traded well off their record highs. BP , Royal Dutch Shell , gas producer BG Group and Cairn Energy lost 0.2 to 1.2 percent.

Miners tracked higher metal prices, with BHP Billiton , Rio Tinto , Anglo American , Xstrata , Vedanta Resources, Eurasian Natural Resources , Lonmin and Antofagasta adding between 0.5 and 2.6 percent. (Editing by David Cowell)