June 24, 2013 / 11:23 AM / 4 years ago

Britain's FTSE hits 5-1/2 month low as China fears weigh

* FTSE 100 falls 1.1 percent

* Chinese growth, liquidity concerns hit miners

* Index down 11.6 percent since late May

* Vodafone outperforms after agreeing Kabel deal

By Alistair Smout

LONDON, June 24 (Reuters) - Britain's top share index slipped to a 5-1/2 month low on Monday, as worries about China's credit markets hit the mining sector and prolonged a recent losing streak.

At 1102 GMT, the blue-chip FTSE 100 index was down 67.45 points, or 1.1 percent, at 6,048.72 points after falling to 6,045.81, the lowest since early January.

On Friday, it recorded its fifth consecutive week of losses and is now down more than 11 percent since a 13-year peak in late May, when the U.S. Federal Reserve first pondered strategies to scale back its unprecedented stimulus programme.

Miners were the worst hit, down 1.2 percent on worries a liquidity squeeze in China may curb metals demand already hit by slower growth. Goldman Sachs cut its China growth forecast for 2013 to 7.4 percent from 7.8 percent on soft cyclical signals and recent tightening of financial conditions.

China's central bank also asked commercial banks to improve the ways they manage liquidity. Interest rates for short-term funds spiked to extraordinary levels last week as big banks held back on lending in the interbank market.

"China is certainly at the forefront of investors' minds, with liquidity fears and Goldman Sachs downgrading their growth forecasts, and for the moment concern over growth there trumps any mild improvement in developed country growth forecasts." Jeremy Batstone-Carr, analyst at Charles Stanley, said.

"We're not in capitulation territory, but there's a steady loss of confidence in equity markets."

James Butterfill, global equity strategist at Coutts, said that rising Chinese wages were increasing costs for companies rather than hurting consumer demand, leaving European miners more exposed than luxury or auto sectors.

Basic resources took 10 points off the index, contributing to the weakness in the broader index, which fell below its 200-day moving average and the 61.8 percent retracement of its rally from November to May at 6,089.1.

The mining sector also came under pressure following a 9 percent drop in Kazakhmys after the board of the miner, the single largest shareholder in ENRC, said it will back a buyout bid for its troubled rival.

The trio of founders behind ENRC confirmed a buyout bid valuing the group at more than 3 billion pounds ($4.7 billion). ENRC shares edged 0.8 percent higher, outperforming the sector and the market.

In other M&A news, Vodafone said it had agreed to buy Germany's largest cable operator Kabel Deutschland for 7.7 billion euros ($10.12 billion).

Vodafone opened lower before recovering to trade 0.1 percent higher. Traders said the acquisition's risks were mitigated by the apparent avoidance of a drawn out bidding war. ($1 = 0.7612 euros) (Additional reporting by Atul Prakash; Editing by Ruth Pitchford)

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