FTSE ends lower on commodities

By Dominic Lau

LONDON (Reuters) - The FTSE 100 .FTSE closed 0.9 percent lower on Monday, weighed down by commodity stocks, while banks pared early gains following a negative note on their U.S. peers.

The benchmark ended down 36.13 points at 3,993.54, falling below the 4,000 mark again, after closing above that level on Thursday and extending Friday's 2.3 percent losses. The index is down 10 percent for the year after sliding more than 31 percent in 2008.

"In short term, the index is due for a bit of a drift back. In the past three weeks, the markets have risen the best part of 17 percent," said Tim Whitehead, head of portfolio services at Redmayne-Bentley.

"Profit taking is understandable," he said, adding investors would likely stay on the sidelines to wait for further clarity in the economy before positioning themselves.

Miners shaved most points off the index, as metal prices fell. BHP Billiton (BLT.L), Eurasian Natural Resources (ENRC.L), Lonmin (LMI.L), Vedanta Resources (VED.L), Xstrata (XTA.L), Randgold Resources (RRS.L) and Fresnillo (FRES.L) were down between 2.9 percent and 8.7 percent.

Rio Tinto (RIO.L) shed more than 11 percent after the Sunday Times said the miner had drawn up contingency plans to raise $8 billion in a rights issue.

Oil producers also languished, tracking softer crude prices. BP (BP.L), Royal Dutch Shell (RDSa.L), Cairn Energy (CNE.L) and Tullow Oil (TLW.L) fell between 0.9 percent and 2.2 percent.

Banks surrendered some of their early gains after veteran analyst Mike Mayo of Calyon initiated coverage on several large U.S. banks with an "underperform" or "sell" rating, citing increased problem loans and the government's inability to resolve them, according to FlyOnTheWall.com.