* RBS and Lloyds fall after Deutsche Bank downgrades
* FTSE 100 slips but still up 10 pct so far in 2016
* Rise in sterling weighs on FTSE 100
* But robust UK services data lifts FTSE 250 index
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By Sudip Kar-Gupta and Alistair Smout
LONDON, Sept 5 Britain's top shares index edged
lower on Monday as a fall in the shares of Royal Bank of
Scotland and its rival Lloyds weighed on the
The blue-chip FTSE 100 index was down 0.2 percent at
6,879.42 points by the close, retreating from a 2.2 percent rise
on Friday that pushed it up to a two-week high.
RBS was the biggest faller on the FTSE 100, falling 3.5
percent, with Lloyds down 2.1 percent, after Deutsche Bank
downgraded RBS to "sell" from "hold" and cut Lloyds to "hold"
Deutsche Bank said RBS would be hit by the negative interest
rate environment engulfing the broader banking sector, since
rock-bottom rates can hit banks' profitability, while Lloyds
could be impacted by customers' re-mortgaging.
"This Deutsche report is impacting the UK banks, with a
pretty substantial downgrade of RBS," said Mike Ingram, market
analyst at BGC Partners, who said that interest rates were so
low as central banks had to make up for policy inaction by
"We're just coming out of another G20, with a lot of
jaw-boning about looking at non-monetary policy options, but
there's a lot of rhetoric and not much action."
The weak economic backdrop, which has led to record low
interest rates in the euro zone and Britain in a bid to
stimulate growth and lending, was also highlighted by leaders at
the G20 meeting in China.
"Although stock markets may be open to further gains in the
short term, the ingredients for a bear trend remain visible and
as such should keep investors alert. The ongoing concerns over
the global economy may spark jitters," said FXTM research
analyst Lukman Otunuga.
The FTSE 100 is up around 10 percent so far in 2016,
although the U.S. dollar value of UK shares was impacted by a
drop in sterling in the immediate aftermath of Britain's June
vote to leave the European Unio.
The index was also hindered by a rise in sterling,
which climbed following data which showed that Britain's
services industry bounced back strongly last month from a slump
triggered by the Brexit referendum.
The globally-focused companies that dominate the FTSE 100
tend to benefit when sterling falls on currency markets,
since a weaker sterling can help their exports.
However, the relatively robust services industry reading
helped the FTSE 250 mid-cap index, whose companies are
more exposed to the domestic UK economy than those in the FTSE
100. The FTSE 250 rose 0.1 percent.
Oil and gas shares rose, in line with crude prices. The
sector was 1 percent higher, ending off of highs.
Brent crude had been up as much as 5 percent in anticipation
of a deal between Saudi Arabia and Russia to limit output.
However, it was up just 1.4 percent after the agreement yielded
no immediate action.