* FTSE 100 down 0.1 percent
* August U.S. retail sales data eyed; due at 1230 GMT
By Tricia Wright
LONDON, Sept 14 (Reuters) - Britain's top shares were slightly lower at midday on Tuesday, as falls in tobacco stocks offset continued strength from banks, ahead of U.S. retail sales data and after shrugging off domestic inflation data.
By 1112 GMT, the FTSE 100 was 3.48 points, or 0.1 percent, lower at 5,562.05, having closed 1.2 percent firmer at 5,565.53 on Monday, a fresh four-month closing high.
Gains were seen among banks, with HSBC and Standard Chartered putting on 0.5 percent and 0.9 percent respectively, though Barclays and Lloyds Banking Group both fell 0.2 percent.
"I think in the UK and in Europe this morning we saw a little bit of a re-evaluation after the big ramp-up in stocks after Basel III," David Morrison, market strategist at GFT Global said.
"Perhaps a few concerns that although there are eight or nine years for the increased capital requirements to come into play, there might nevertheless be banks following Deutsche Bank and wanting to come to market sooner rather than later."
Royal Bank of Scotland was the best sector performer, rising 1.1 percent. RBS said it planned to sell 4.7 billion pounds of mortgage-backed securities in its first such deal since the onset of the credit crisis.
British inflation defied expectations of a fall in August and held steady at the level that last month forced the Bank of England to write a public letter to explain why prices were rising so fast.
Outsourcing group Capita grabbed top spot on the FTSE 100 leader board, adding 2.8 percent, while midcap peer Logica also rose after Capgemini UK announced it has signed a MoU with the UK government which reassured investors about public sector contracts.
Defence group Cobham was another good gainer, up 2.1 percent after Credit Suisse upgraded its rating on the stock to "outperform" from "neutral", saying it has increased its earnings per share estimate for 2010.
U.S. OPEN AWAITED
U.S. stock index futures,, pointed to a mixed start on Wall Street on Tuesday, ahead of August U.S. retail sales data, due at 1230 GMT, which will provide further clues as to the strength of the U.S. economic recovery.
Economists expected a 0.3 percent rise compared with a 0.4 percent increase in July. Investors were also waiting for U.S. business inventories for July, due at 1400 GMT.
"We are now looking ahead to the U.S. open. Technically, the U.S. indices certainly have some room to the upside before they test this major resistance band which is about another 1 percent above where we are at the moment," GFT Global's Morrison said.
Defensive tobacco stocks were under pressure, with Imperial Tobacco falling 1 percent, while British American Tobacco dropped 0.9 percent.
TUI Travel shed 1.2 percent, after BofA Merrill Lynch cut its rating for the tour operator to "neutral" from "buy" and reduced its target price to 230 pence from 270 pence in a review of the European sector.
Next dropped 1.5 percent after Societe Generale cut its rating on the fashion chain to "sell" from "hold" ahead of first-half results on Wednesday. (Editing by Dan Lalor)