Blue-chip index was on track for its biggest daily fall in nearly a month on Wednesday, dragged down by commodity and banking stocks after signs of waning support for fresh U.S. stimulus weighed on risk appetite.

By 12:10 p.m., the FTSE 100 <.FTSE> index was down 69.20 points, or 1.2 percent, at 5,768, having shed 0.6 percent on Tuesday after recording its biggest daily rise in two months in the previous session.

It still outperformed core-Europe peers, however, with both France's CAC-40 <.FCHI> and Germany's DAX <.GDAXI> down around 1.7 percent, weighed by weak regional economic data and yet more peripheral euro zone debt weakness.

The European Central Bank held interest rates at a record low of 1 percent on Wednesday and was expected to resist German pressure to flag an exit from its crisis-fighting mode later in the day.

Federal Reserve policymakers, meanwhile, have backed away from the need for another round of monetary stimulus as the U.S. economy gradually improves, minutes of the central bank's March meeting, published on Tuesday, showed.

The dampening effect of the Fed's decision on the market could be relieved if key U.S. jobless data out later this week proves better than expected, Keith Bowman, equity analyst at Hargreaves Lansdown, said.

The market's still taking stock of yesterday's Fed meeting minutes, but non-farm payrolls have been the main impetus behind this year's rally, so if they were to come in above expectations that could provide further momentum, he said.

With further positive economic data we could see the cyclical sectors such as miners and financials benefiting, but if the data turns sour then people could head back to the safe defensive ports -- not that they've totally gone out of fashion.

A U.S. ADP national employment report will be released at 01:15 p.m., a pointer towards Friday's much-anticipated non-farm payrolls, followed by the March ISM non-manufacturing index at 03:00 p.m.

Miners <.FTNMX1770> were the biggest drag on the blue chips, falling in parallel with copper as weak trade data from mining heavyweight Australia clouded the outlook for commodity linked stocks.

Silver producer Fresnillo , topped the losers' board with a 5.3 percent fall, while Russian sector peers steelmaker Evraz and precious metals miner Polymetal
were down 4.9 percent and 3.9 percent, respectively.

Domestic banks <.FTNMX8350> were also among the worst performers as investors appetite took a knock, with Barclays and Royal Bank of Scotland the worst off, both shedding 3.0 percent.

The downbeat market mood was tangible from a technical standpoint as well, Barclays Capital technical analyst Lynnden Branigan said, adding that the index was unlikely to move higher this week.

The FTSE got off to a bearish start after the fall yesterday. In terms of downside we're probably going to see some moves towards the range lows in the 5,750 area today, he said.


Further signs of an improving outlook for the UK economy will have little impact on the FTSE-100 as a whole, but certain sectors including banks could get a small fillip, Gerard Lane, an equity strategist at Shore Capital, said.

Seventeen percent of the FTSE 100 is accounted for by overseas revenue, so the index has very little to do with the UK economy, but parts of the market that could improve on UK economic sentiment are the general retailers, leisure companies and domestic banks, Lane said.

It's a market you want to be defensive in, while seizing the opportunity to participate in some domestic growth by being quite selective on some UK-centric names, he said citing leisure group Whitbread .

Countering the broad cyclical weakness were drug stocks, which added most points to the index as investors sought out their defensive qualities, with GlaxoSmithKline up 0.4 percent.

Peer Shire was the top FTSE 100 gainer, ahead 1.0 percent, rallying after recent falls following the failure of a clinical study for its bowel disease drug, Lialda.

(Editing by John Stonestreet)