FTSE down 1.1% as U.S. data weighs

By Michael Taylor

LONDON (Reuters) - The blue-chip index extended earlier losses to shed over 1 percent on Thursday after a flurry of U.S. data helped turn banks negative and commodity prices pulled energy stocks lower.

The FTSE 100 .FTSE ended down 65.8 points, or 1.1 percent at 5,980.4 to deny investors a third successive session of gains.

U.S. data dominated market direction, turning the index negative after first-quarter earnings from Merrill Lynch MER.N. The world's largest brokerage reported a loss after taking several billion dollars of writedowns for subprime mortgages and other risky assets.

Banks mostly turned negative after the Merrill update despite earlier leading the upside on hopes that an intervention plan being considered by British authorities will help ease tensions in the mortgage market.

HSBC (HSBA.L) lost 1.1 percent, Standard Chartered (STAN.L) dipped 1.2 percent but Alliance & Leicester ALLL.L climbed 1.4 percent and HBOS HBOS.L added 2 percent.

Royal Bank of Scotland (RBS.L) gave up 2.4 percent on market talk of a rights issue. RBS declined to comment.

"It seems even the most optimistic missile is in danger of being shot down again by negative sentiment across the pond," said Anthony Grech, a market analyst at IG Index.

"Investors on the UK index were momentarily upbeat this morning, with the FTSE hitting 6,086.4 in early trading thanks largely to yesterday's suggestion that the government could help pull the stricken banking sector out of its credit crunch-shaped hole."