FTSE falls on risk aversion; banks, commods hit
* FTSE down 0.6 percent
* Banks down as risk wanes; Lloyds up on rights issue
* Mining, energy stocks gain as commodity prices fall
* Some defensives rally
By David Brett
LONDON, Nov 24 - Britain's top share index shed 0.6 percent early on Tuesday as waning risk appetite hit banks, and commodities weakened as the dollar stabilised, while some defensives gained.
At 0911 GMT the FTSE 100 index <.FTSE> was down 28.94 points at 5,326.56, having finished up 104.09 points, or 2 percent on Monday recording its biggest one-day percentage rise in more than six weeks.
The UK blue chip index is up 20.8 percent this year and has soared more than 50 percent since touching a six-year trough in March, but remains 1.1 percent off levels prior to Lehman Brothers' collapse.
"It's pleasing to see a little bit of red on the boards. The market's eurphoria of late has been hard to comprehend and it has gone a little too far ahead of itself," said Howard Wheeldon, strategist at BGC Partners.
"The market has been a bit mixed up of late and it's a case of who do we actually follow? Traditionally it has been the U.S. but we're going in different directions at the moment and equity markets have to adjust to that."
London shares tracked losses in Asia where stocks slipped back as the dollar stabilised and investors took a breather after recent gains, with China suffering its biggest one-day fall in nearly three months.
Banks were the biggest fallers as investors preferred defensively perceived issues.
Europe's biggest bank HSBC <HSBA.L> and Standard Chartered <STAN.L> led the falls down 1.9 and 2 percent respectively, while Royal Bank of Scotland <RBS.L> and Barclays <BARC.L> slipped 0.1 and 0.5 percent each.
Lloyds Banking Group <LLOY.L> bucked the trend, rising 1.2 percent after it priced its record 13.5 billion pound ($22.4 billion) rights issue at 37 pence per share, a smaller than expected discount, as it battles to escape a costly state-backed insurance scheme for bad debts.
Miners retreated as metals prices pared Monday's gains, impacted by a stabilising dollar against a basket of currencies, with gold <XAU=> slipping back from historic highs.
Eurasian Natural Resources <ENRC.L>, Randgold Resources <RRS.L>, Fresnillo <FRES.L>, Xstrata <XTA.L>, and Rio Tinto <RIO.L> gained 1.1 to 2.1 percent.
Energy stocks were also weaker as crude prices <CLc1> retraced recent gains. BP <BP.L>, Royal Dutch Shell <RDSa.L> and BG Group <BG.L> fell 0.5 to 0.9 percent.
Among individual fallers, hedge fund firm Man Group Plc <EMG.L> fell 2 percent as Credit Suisse downgrades its rating to "neutral" from "outperform", on valuation grounds.
Burberry <BRBY.L> was down 0.8 percent after Morgan Stanley cut its recommendation to "equal-weight" from "overweight" on valuation grounds.
DEFENSIVES WANTED
A broad mix of defensive issues kept the FTSE from posting deeper losses as investors bought into assets perceived as better able to withstand tough economic conditions.
British power generation company International Power <IPR.L> was a big gainer, up 1.5 percent as Evolution Securities repeated its "buy" rating citing moves in Australia to improve coal plant compensation.
Among other defensives, pest control to parcel delivery firm Rentokil Initial <RTO.L> rose 1.6 percent, motor insurer Admiral <ADML.L> is up 0.7 percent and household cleaning products group Reckitt Benckiser <RB.L> added 0.9 percent.
A raft of U.S. data for investors to digest this afternoon, including November consumer confidence numbers, the September Case/Schiller home prices survey, and the FHFA home prices index.
Attention will also be on the publication of minutes from the Nov 3-4 FOMC meeting, due after the London close at 1900 GMT. ((david.brett@reuters.com; +44 207 542 8099; Reuters Messaging:david.brett.reuters.com@reuters.net))