Weak banks, miners push FTSE down 0.7 percent

* Banks lower on Moody's and Credit Suisse caution

* Miners weak after recent gains; metal prices down

By Tricia Wright

LONDON, March 9 (Reuters) - Weak banks helped drive Britain's top share index 0.7 percent lower by midday on Tuesday after analysts cautioned over the sector's funding position, with miners also on the back foot as recent gains unwind.

By 1204 GMT, the FTSE 100 <.FTSE> was down 35.81 points at 5,570.94, having ended up 0.1 percent on Monday, its highest close since Sept. 2, 2008 -- before Lehman Brothers collapsed.

"It is a slowish day. I don't take this as being anything significant in terms of calling a halt to where the market wants to trade, I think it is just a day for taking off some profit," said Stephen Pope, chief global market strategist at Cantor Fitzgerald.

Banks took the most points off the index, extending Monday's losses. Moody's Investors Services said British banks and lenders that have not improved their funding position may have their financial-strength ratings cut as government support for the industry is withdrawn.

Credit Suisse also issued a cautious note on British banks.

Barclays <BARC.L>, Lloyds Banking Group <LLOY.L> and Royal Bank of Scotland <RBS.L> were down 2 to 3.5 percent. HSBC <HSBA.L> and Standard Chartered <STAN.L> fell 1.4-3.4 percent.

Miners were also in the doldrums, after a recent strong run, and against a backdrop of lower metals prices. Kazakhmys <KAZ.L>, Fresnillo <FRES.L> and Rio Tinto <RIO.L> were among the worst off, shedding 2.2-2.7 percent.

Chilean copper miner Antofagasta <ANTO.L> fell 1.5 percent after reporting lower earnings per share, on 12 percent lower revenues. [ID:nLDE62721A]

Imperial Tobacco <IMT.L> dropped 3 percent as UBS cut its rating on the stock to 'sell' from 'neutral'. British American Tobacco <BATS.L> shed 1.4 percent.

Britain's biggest mall owner Liberty International <LII.L> was the top blue chip faller, down 3.5 percent after it unveiled plans for a demerger which it said would enhance shareholder value, as it posted a 38 percent fall in 2009 net asset value. [ID:nLEE6E3003]

Satellite communications firm Inmarsat <ISA.L> fell 2.1 percent after the company reported an 18 percent rise in fourth-quarter earnings, with the stock having had a strong run ahead of the numbers.

DEFENSIVES IN DEMAND

Buyers came in for selected defensive stocks, with drugmaker GlaxoSmithKline <GSK.L> among the top blue-chip risers, up 0.9 percent and recovering after the previous session's decline, while drinks firm SABMiller <SAB.L> put on 0.3 percent.

International Power <IPR.L> took on 1.2 percent after beating forecasts with a 10 percent rise in 2009 profit on strong demand for power in Asia and Australia. [ID:nWLB9515]

Investors were presented with a mixed bag of British data.

Britain's goods trade deficit with the rest of the world widened in January to its biggest since August 2008, raising further concern about the strength of the country's broader economic recovery. [ID:nLDE6280RZ]

The Royal Institution of Chartered Surveyors said overnight the British house prices grew last month at their slowest pace since August after the amount of new property coming on to the market grew faster than the number of buyers. [ID:nLAG006161]

Meanwhile, British retail sales recovered last month from January's snow-related slide, helped by strong sales of clothing and footwear, a survey by the British Retail Consortium found. [ID:nLAG006160] (Editing by Dan Lalor)