Weak oils, caution on banks depress early FTSE

* Oils down despite slight crude price rally

* Rio falls on rights issue talk

* Stagecoach dives on cautious outlook statement

By Jon Hopkins

LONDON, Dec 3 (Reuters) - Britain's top share index .FTSE fell 1.3 pct in early trade on Wednesday with oils majors weak again and investors cautious about banks ahead of Thursday's interest rate decisions in the UK and Europe.

At 0915 GMT, the FTSE 100 index .FTSE was down 56.68 points at 4,066.18, having closed 57.37 points, or 1.4 percent higher at 4,122.86 on Wednesday. "With weaker economic growth, falling profitability, and a soft labour market are unnerving investors it's no surprise that equities remain volatile," says Henk Potts, equity strategist at Barclays Stockbrokers.

Weakness in oil majors was a drag on blue chip sentiment as crude prices CLc1 rallied slightly but stayed around the $47 a barrel level -- over $100 down on this year's peak.

BP (BP.L: Quote, Profile, Research, Stock Buzz) shed 3.1 percent, while Royal Dutch Shell (RDSa.L: Quote, Profile, Research, Stock Buzz) fell 2.7 percent and BG Group (BG.L: Quote, Profile, Research, Stock Buzz) lost 0.4 percent

Shares in miner Rio Tinto (RIO.L: Quote, Profile, Research, Stock Buzz) tumbled 9 percent as traders noted rumours of asset writedowns and a possible rights issue to pay for its takeover battle costs.

Other miners were broadly higher with Eurasian Natural Resources (ENRC.L: Quote, Profile, Research, Stock Buzz) adding 0.1 percent, Kazakhmys (KAZ.L: Quote, Profile, Research, Stock Buzz) up 1.1 percent, and Vedanta Resources VED gaining 1.5 percent in spite of trading ex-dividend Wednesday.

BHP Billiton (BLT.L: Quote, Profile, Research, Stock Buzz) firmed 0.6 percent as Citigroup resumed coverage on the stock with an upgrade to "buy" from "hold".

Citigroup also upped its rating for Rio Tinto to "buy" from "hold".

BANKS CAUTIOUS, STAGECOACH FALLS

Trading in banks was cautious ahead of Thursday's Bank of England interest rate news as the sector's woes continued to dominate.

Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz), a big gainer ahead of an index re-weighting last night, fell 0.3 percent, HBOS (HBOS.L: Quote, Profile, Research, Stock Buzz) and Lloyds TSB (LLOY.L: Quote, Profile, Research, Stock Buzz), also risers on Tuesday, lost 1.9 and 2.6 percent respectively while Barclays (BARC.L: Quote, Profile, Research, Stock Buzz) shed 2.6 percent.

"There is lots of nervousness as to how aggressive the Bank of England will be tomorrow, with a 50 basis point rate cut certainly priced in and expectations for a full point high," Potts added.

"The bigger the party, the worse the hangover and the credit expansion party was very big, so some historically strong medicine is needed from the Bank of Englnd," Potts added.

Stagecoach (SGC.L: Quote, Profile, Research, Stock Buzz) was the biggest FTSE 100 faller, down 19.8 percent as a cautious outlook statement from the bus and rail operator accompanied a 24 percent rise in first half profits.

The firm forecast challenging markets for its rail division and said it was planning to cut jobs.

Blue chip peer Firstgroup (FGP.L: Quote, Profile, Research, Stock Buzz) lost 5.1 percent, and mid cap Go-Ahead Group (GOG.L: Quote, Profile, Research, Stock Buzz) shed 10.9 percent.

Power generator Drax was also weak, down 5.1 percent as Credit Suisse cut its rating to "underperform" from "outperform" in a cautious review of European utilities.

National Grid (NG.L: Quote, Profile, Research, Stock Buzz), down 2 percent, was also downgraded by Credit Suisse to "underperform" from "neutral", with the stock also trading ex-dividend Wednesday.

Stocks changing hands without their dividend attractions accounted for 2.4 points of the FTSE 100 index falls.

British Prime Minister Gordon Brown will propose measures later in the day aimed at helping hard-pressed families and small firms through a recession. [ID:nL2657245]

(Editing by David Cowell)