FTSE falls as growth fears hit commodities, banks

* FTSE 100 falls 1.1 pct early

* Global recession fears weigh on commodity stocks

* Banks weak but HBOS, Lloyds and RBS rebound (For more on the financial turmoil, click on [nCRISIS])

By Dominic Lau

LONDON, Oct 15 (Reuters) - Britain's leading share index fell 1.1 percent early on Wednesday, snapping a two-day recovery and tracking weakness in the U.S. and most Asian markets as fears of a global recession intensified.

Commodity stocks led the losers on the FTSE 100 .FTSE, which was down 47.6 points at 4,346.6 at 0737 GMT. The UK benchmark rebounded nearly 12 percent in the previous two sessions after plummeting 21 percent last week -- its second worst weekly fall ever.

Miners took a beating as base metal prices slipped and after Rio Tinto (RIO.L: Quote, Profile, Research, Stock Buzz) warned of slowing Chinese demand for commodities because of the world financial crisis and signalled a possible delay in plans to sell $10 billion in assets.

Rio Tinto shed 5.4 percent, BHP Billiton (BLT.L: Quote, Profile, Research, Stock Buzz) fell 5.9 percent, Anglo American (AAL.L: Quote, Profile, Research, Stock Buzz) dropped 7 percent, Xstrata (XTA.L: Quote, Profile, Research, Stock Buzz) lost 7.4 percent and Eurasian Natural Resources (ENRC.L: Quote, Profile, Research, Stock Buzz) slipped 8.8 percent.

With crude prices CLc1 easing below $79 a barrel on recession and demand concerns, energy stocks languished. BP (BP.L: Quote, Profile, Research, Stock Buzz), Royal Dutch Shell (RDSa.L: Quote, Profile, Research, Stock Buzz), BG Group (BG.L: Quote, Profile, Research, Stock Buzz) and Tullow Oil (TLW.L: Quote, Profile, Research, Stock Buzz) were down 1.6 to 3.5 percent.

"While we may overcome the immediate financial crisis ... you have got the broader economy to consider. Things are not looking so cheerful," said Tim Hughes, head of sales trading at IG Index. "The broader global economy is still incredibly precarious and facing some huge challenges going forward."

Banks were other standout losers, with the FTSE 350 banks index losing 2 percent. Barclays (BARC.L: Quote, Profile, Research, Stock Buzz), HSBC (HSBA.L: Quote, Profile, Research, Stock Buzz) and Standard Chartered (STAN.L: Quote, Profile, Research, Stock Buzz) lost between 0.9 and 4.9 percent.

Lloyds TSB (LLOY.L: Quote, Profile, Research, Stock Buzz) advanced 5.2 percent after the Independent said the government was considering a U-turn that would allow the bank to pay dividends to shareholders while still taking advantage of its 37 billion pounds bank bailout scheme.

The Financial Times also said some of Britain's banks were urging the government to lift the ban on dividend payments imposed as part of the bailout of the crisis-hit sector.

HBOS (HBOS.L: Quote, Profile, Research, Stock Buzz), which is to be merged with Lloyds, rose 2.6 percent, while Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz) added 1.4 percent.

RBS, Lloyds and HBOS "would be well-served by paying some level of (low) dividend simply to re-enter the dividend list and allow income funds to again hold banks," said Alex Potter of Colins Stewart in a note.

"Beyond that, the payout would likely be limited by the wish to pay the government's equity injection down."

FINANCIALS DOWN

Insurers sagged after the Times said the Financial Services Authority had stepped up its scrutiny of leading life assurers amid concerns that crumbling investment markets are putting their solvency level under pressure.

Prudential (PRU.L: Quote, Profile, Research, Stock Buzz), Old Mutual (OML.L: Quote, Profile, Research, Stock Buzz), Aviva (AV.L: Quote, Profile, Research, Stock Buzz) and Standard Life (SL.L: Quote, Profile, Research, Stock Buzz) sank between 0.2 and 5 percent.

UK employment data, due at 0830 GMT, will provide a further gauge to the health of the British economy as concerns grow that it is heading into a deep recession.

Experian (EXPN.L: Quote, Profile, Research, Stock Buzz) shed 6.3 percent after the credit checking firm reported a 13 percent rise in first half revenue, and said it had decided not to sell its price comparison Web site, Pricegrabber as potential buyers were unlikely to be able to finance acceptable offers in current market conditions. BAE Systems (BAES.L: Quote, Profile, Research, Stock Buzz), which went ex-dividend, slipped 3.1 percent. The defense contractor said trading was in line with expectations. [ID:nWLB2659]

British Land (BLND.L: Quote, Profile, Research, Stock Buzz) and Simth & Nephew (SN.L: Quote, Profile, Research, Stock Buzz) also fell after going ex-dividend.

Autonomy (AUTN.L: Quote, Profile, Research, Stock Buzz) rose 3.7 percent after the software group beat market expectations by posting adjusted pretax profit of $53.7 million for the third quarter, and said it was "confident" about its outlook.

Pearson (PSON.L: Quote, Profile, Research, Stock Buzz) added 3.8 percent. The publishing group said its adjusted 2008 earnings per share should be toward the top end of current market estimates if the dollar maintains gains versus sterling.

Defensive drugmakers were also in demand, with Shire (SHP.L: Quote, Profile, Research, Stock Buzz) gaining 1.8 percent and AstraZeneca (AZN.L: Quote, Profile, Research, Stock Buzz) up 0.4 percent. (Editing by Hans Peters)