Banks drag FTSE down, miners up on China policy

* FTSE down 0.1 percent

* Banks wane, Standard Chartered slips on downgrade

* Miners rise as China opts to raise reserve requirements

By David Brett

LONDON, Dec 9 (Reuters) - Banks pulled Britain's top shares lower by midday on Friday led by Standard Chartered on a broker downgrade, while miners gained after China opted to raise its reserve requirements as it tightened monetary policy.

By 1150 GMT, the FTSE 100 <.FTSE> was down 8.02 points at 5,799.94, following Thursday's 0.2 percent gain.

China's central bank on Friday raised lenders' required reserves by 50 basis points, effective Dec 20, its sixth increase this year.

Although the move is an attempt to cool excessive growth in the world's fastest-growing major economy, traders were comforted that China did not opt to increase its interest rates.

"It's the lesser of the two evils as far as the market is concerned," Jimmy Yates, head of equities at CMC Markets, said.

"It now seems unlikely that China will raise interest rates before the new year and that should give a lift to sectors such as the miners as it shows China's inflation isn't excessive."

Mining stocks <.FTNMX1770> were the main support on London's blue chip index, with precious metals miner Fresnillo up 1.6 percent.

Miner Anglo American gained 1.1 percent after saying it will start building early next year one of its biggest growth projects, the Minas Rio iron ore operation in Brazil, after getting a key licence from the government.

Investors will still watch for Chinese inflation data, due out on Saturday, the most important predictor of future monetary policy at this juncture in the economic cycle. [ID:nTOE6B203E]

BANKS WEIGH

Banks <.FTNMX8350> were the worst performing sector on London's blue chip index, handing back some of the previous session's gains and led lower by Standard Chartered.

Standard Chartered fell 2.9 percent after BofA Merrill Lynch downgraded the Asia focused bank to "neutral" from "buy", calling its trading update on Thursday "disappointing relative to expectations".

British factory gate inflation slowed unexpectedly in November, providing some reassurance to the Bank of England that underlying inflationary pressures are in check. [ID:nAHL9NE6AS]

Wall Street futures pointed to a firmer open on Friday, as investors await U.S. data, with International trade data for October due at 1330 GMT and the Thomson Reuters/University of Michigan Surveys of Consumers due at 1455 GMT.

Back on the upside, Diageo , the world's biggest drinks company, rose 1.6 percent after expressing interest in Turkish spirits company Mey Icki, a person familiar with the matter said. [ID:nLDE6B90GK]

Cobham added 2.4 percent. The Daily Express market report said the defence contractor's recent share price weakness has left it vulnerable to a predatory approach.

Equities continue to show resilience in the face of macroeconomic uncertainty, as investors back the ability of companies to grow profits and yields, even in austere times.

"The steadiness of the market has been surprising but I think that reflects the growing confidence and conviction in the outlook for next year," Mike Lenhoff, chief strategist at Brewin Dolphin Securities in London, said. (Editing by Jon Loades-Carter)