Volatile FTSE down as commodities drag; banks weigh

By Michael Taylor

LONDON, March 19 (Reuters) - The FTSE 100 index .FTSE of Britain's leading shares ended down 1.1 percent on Wednesday as fresh concerns over the health of the UK banking sector weighed on financial stocks and miners also fell.

The Bank of England said on Wednesday it had not met any British bank or scheduled to meet any to discuss potential problems, in a rare response to market speculation that a bank could face trouble -- which sent some banks down sharply in early trade.

HBOS (HBOS.L: Quote, Profile, Research) closed down 7.1 percent, having tumbled as much as 17 percent to a record low earlier. Royal Bank of Scotland (RBS.L: Quote, Profile, Research) fell about 2.9 percent and Alliance & Leicester (ALLL.L: Quote, Profile, Research) shed 2.7 percent.

The blue-chip index was 60.2 points lower at 5,545.6 having touched a high of 5,653.6 earlier in the day during an extremely choppy session.

"We are experiencing an unusually high amount of rumours winging around the stock market," said Martin Slaney, head of derivatives at GFT Global Markets. "UK banks are the latest victim of the over-active rumour mill."

"Much of this is probably unfounded supposition and speculation, but with panic still gripping the markets, investors seem to be attaching more credence to the scaremongers than would be the case in more stable times."

VOLATILITY