The top share index fell in midday trade Thursday, with financials and miners among the top fallers as strained finances in Europe took a further blow after France's debt auction.

The blue chip index <.FTSE> was down 42.14 points, or 0.7 percent at 5,626.31 by 11:57 a.m. as investors withdrew funds out of riskier assets.

In an auction of 4.02 billion euros of 10-year OAT bonds, France drew bids worth 1.643 times the amount on offer, down from 3.046 times in December, with yields up to 3.29 percent, from 3.18 percent last month.

The debt auction by France, whose triple-A credit rating is under threat, followed a subdued German Bunds auction and a deeply discounted rights issue from Italy's UniCredit Wednesday, which highlighted investors' lack of trust in euro zone finances and firms heavily exposed to its problems.

Stefan Angele, head of investment management at Swiss & Global Asset Management which has assets under management of about 75.7 billion swiss francs, said: Our baseline scenario of weaker economic growth but no recession only holds if we see no major shock in the financial sector.

In this context, we must focus on the public debt crisis in the industrialised world and particularly Europe, which currently poses the biggest threat to the global financial system.

With worries over their earnings outlook because of their exposure to Europe's debt crisis, UK-listed banks were lower. Lloyds Banking Group fell 0.9 percent with added worries over the possibility of a future need for recapitalisation.

Other financials with exposure to Europe's debt crisis and the resulting market uncertainty fell too, with insurer Legal & General down 2.4 percent and interdealer broker ICAP off 3.3 percent.

ICAP came under more pressure after mid-cap peer Tullett Prebon , down 0.4 percent, highlighted a difficult trading environment in a trading update.

UBS issued cautious comment on the sub-sector and said, ahead of ICAP's trading statement on Feb 1, we remain cautious on the IDB which we expect to be affected by bank deleveraging.


Among the miners, whose earnings rely heavily on companies' and governments' ability to dip into their wallets for future developments, Kazakhmys was down 1.9 percent.

Sentiment surrounding the miners wasn't helped as Credit Suisse downgraded the European building materials sector to market-weight.

The broker said it viewed sector fundamentals and valuations as unattractive and did not anticipate any improvement in profitability this year.

Credit Suisse also cut UK-listed Irish building materials firm CRH , down 2.3 percent, to underperform.

Wolseley , however, was spared the cull, gaining 0.8 percent as Credit Suisse talked up its strong pricing power and margin protection, its market share gains in the U.S., a possible use of balance sheet for M&A or shareholder returns, and safer end-market exposure.

JP Morgan, separately, upgraded Wolseley to overweight from neutral.

Heavyweight Vodafone shed 2.1 percent as its U.S. partner Verizon Wireless said it expected a decline of up to 6 percentage points in its fourth-quarter gross profit margins, raising concerns over Vodafone's dividend.

Longer-term we remain confident that margins will recover ... driving strong free cash flow growth and allowing for dividends to flow down to Vodafone, broker Espirito Santo said in a note.

The FTSE was also pressured as U.S. stock index futures pointed to a weaker open with jobs and manufacturing data due out later in the day, ahead of non-farm payrolls Friday.

On the upside, integrated oils and oil-related services and equipment firms outperformed the broader market as investors turned to the sectors' defensive characteristics.

Commodities are another asset class with a decent medium-term risk-reward profile and attractive upside potential driven by secular strong demand. Especially energy (oil) remains in elevated demand and could easily become subject to supply shortages any time, Swiss & Global Asset Management's Angele, said.

Oil major BP gained 0.4 percent and oil services firm Petrofac
was up 1.8 percent.

Tech firms were in demand, buoyed by bullish analyst recommendations.

ARM Holdings rose 3.3 percent as UBS placed a short-term buy rating on the British chip designer, saying it expected the firm's fourth-quarter results to surpass consensus expectations and saw further catalysts in the near term.

Sage gained 0.3 percent as Bank of America-Merrill Lynch upgraded the software maker to buy, highlighting the company's defensive qualities and plans to return cash to shareholders against a backdrop of another tough year for European software and IT services.

Commercial real estate investment trusts found good support, with traders citing the impact of a Morgan Stanley note on the sector which upgrades ratings for the three firms.

Blue chips Land Securities and British Land , and mid cap Great Portland Estates , rose as much as 2 percent.

(Additional reporting by Tricia Wright and Jon Hopkins)