Commodities, banks drag FTSE down

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By David Brett

LONDON (Reuters) - The top share index was down 0.6 percent mid-session on Thursday, dragged lower by heavyweight commodity and banking stocks, which offset gains made by defensive stocks as risk appetite waned.

At 12:08 p.m., the FTSE 100 <.FTSE> was down 29.78 points at 5312.35, after closing 0.1 percent lower on Wednesday.

Miners were the biggest drag on the index as metal prices eased and investors took profits. Eurasian Natural Resources , Xstrata , Rio Tinto , Antofagasta , Anglo American and Vedanta Resources fell 1.8 to 4.9 percent.

"It is time we had some sort of a correction. If you look at what's happening in New York with the equity futures, which are quite low, we can't really be that surprised that we're coming down on a corresponding basis," said David Buik, senior partner at BGC Partners.

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Poor outlooks from software makers and a surprising drop in home construction last month dented momentum in U.S. and Asian markets overnight.

In the UK, the Office for National Statistics said the public sector had a net cash requirement of 5.899 billion pounds last month, nearly twice the expectations.

Separately, the ONS said retail sales rose 0.4 in October, slightly below forecasts of 0.5 percent.

"There's been a bit of a reality to check, but to be honest I though it would have kicked in sooner ... We've reached dizzying heights. It appears this market sees every dip as a buying opportunity," said Philip Gillett, sales trader at IG Index.

The banking sector was generally lower. Europe's largest bank HSBC shed 0.9 percent. Barclays and Royal Bank of Scotland fell 1.1 and 0.1 percent, respectively.

Lloyds Banking Group gained 0.7 percent after the Daily Telegraph reported the bank had received state aid approval from Europe for its planned restructuring.

Energy stocks also edged lower. Royal Dutch Shell , Cairn Energy , Tullow Oil and BP were down 0.2 to 1.1 percent.

DEFENSIVES DOMINATE RISERS

As investors took a risk-adverse attitude, defensive stocks benefited, preventing the FTSE falling further.

Tobaccos gained ground, with British American Tobacco and Imperial Tobacco up 0.4 and 0.5 percent, while utilities extended gains from the previous session with National Grid 0.3 percent higher after its first-half results.

World No. 2 brewer SABMiller Plc rose 3.7 percent after saying it expected a second-half boost from currency movements and a fall in the cost of inputs such as barley after price rises and cost cuts pushed up its first-half profits.

Household cleaning goods group Reckitt Benckiser added 3.1 percent on reports of a link-up with U.S. peer Colgate Palmolive , but analysts were sceptical of an immediate tie up between the two.

Wm Morrison Supermarket rose 1 percent after its third-quarter update, rebounding from Wednesday's falls on the departure of its CEO to Marks and Spencer .

Investors are waiting for weekly U.S. jobless claims data at 1:30 p.m.

(Editing by Will Waterman)

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