Britain’s top share index fell early on Thursday as renewed doubts about
the sustainability of a global recovery dented commodity stocks, and
banks weakened as risk appetite ebbed.

By 0759 GMT, the FTSE 100
was 33.54 points, or 0.7 percent, lower at 5,145.04 after falling 1.3
percent on Wednesday to its lowest closing level in nearly two weeks.

Miners
were the main drag on the index, weighed by a downbeat assessment on
the U.S. economy from the U.S. Federal Reserve, with Rio Tinto and
Xstrata among the heaviest fallers, down 2.3 percent and 1.6 percent
respectively.

In a statement at the end of a two-day meeting,
the Fed scaled back its assessment of the pace of recovery, taking note
of pockets of weakness, and also issued a cautionary note about volatile
financial markets in light of Europe’s debt woes.

“The negative
tone on the speed and strength of the recovery from the Federal Reserve
is infringing on investors’ expectations and there is a sense that
there will be a long period of anaemic growth,” said Henk Potts, analyst
at Barclays Wealth.

The shaky demand outlook offset optimism
inn the mining sector prompted by political developments after Australia
appointed its first woman prime minister, Julia Gillard, who offered to
end a dispute over a controversial “super profits” mining tax, which is
threatening $20 billion worth of investment and has unnerved voters.

Energy
stocks also slipped, pulled lower by a slight retreat in the price of
crude. Royal Dutch Shell and BG Group fell 0.8 percent and 1 percent
respectively.

Austerity bites
Analysts
said austerity measures like those announced by Britain’s finance
minister, George Osborne, on Tuesday were also adding to the gloom.

“There’s
a huge bill to be paid off for the measures implemented to help solve
the financial crisis, and now that bill’s landing on the mat, and
investors are looking ahead to five years of fiscal tightening,” Potts
at Barclays Wealth said.

Banks were also depressed by doubts on
the recovery. Royal Bank of Scotland fell 1.5 percent while Barclays
lost 1.7 percent.

Stocks perceived as relatively immune to
economic stagnation like supermarkets and utilities outperformed.
Morrison Supermarkets added 0.7 percent while National Grid gained 0.3
percent.

No important domestic data were due for release
Thursday, so investor attention will be on a batch of U.S. pointers
including May durable goods orders and the latest weekly jobless claims,
both due at 1230 GMT.
(Editing by Dan Lalor)