UPDATE 1-Pakistani shares close weaker after S&P downgrade

(adds quote, details, close)

KARACHI, May 16 (Reuters) - Pakistani shares ended nearly two percent lower on Friday following a cut in the sovereign credit rating by Standard & Poor's the previous day, dealers said.

The Karachi Stock Exchange (KSE) 100-share benchmark .KSE fell 1.71 percent, or 246.98 points, to its one-week low at 14,232.89 points. Volume was 94.29 million shares and losers beat gainers 225 to 102.

The free-float KSE-30 share index shed 2.16 percent to 16,882.59 points.

"The negative trend was expected after S&P's evaluation," said Shuja Rizvi, director broking at Capital One Equities Ltd.

Ratings agency Standard & Poor's cut Pakistan's sovereign rating, citing increasing pressure from growing budget and trade deficits and a volatile political setting.

Dealers said there was also speculation that the central bank will increase interest rates before its next scheduled monetary policy review in July to curb import demand and contain inflation.

Soaring food and oil prices helped drive inflation to its highest level since the 1970s last month.

The consumer price index rose 3.04 percent in April from March, and showed a 17.21 percent increase over a year earlier.