Britain's top share index weakened on Thursday as a sharp rise in Italian bond yields highlighted investor concerns over sovereign debt, following Moody's warning overnight on the U.S.'s triple-A rating, according to Reuters. The UK's FTSE 100 extended earlier losses, falling 47.58 points, or 0.8 percent to 5,858.85 by 1059 GMT, as worries that Europe's lingering debt crisis may spread across the euro zone continued to weigh on investor sentiment. The Italian Treasury had to pay the highest premium on record to sell 15-year paper in an auction on Thursday. "We are very concerned about there being contagion into Spain or Italy," said Henry Dixon, fund manager of the 25.2 million pound S&W Matterley Undervalued Returns fund. "All of these countries have defaulted in the past, some on many occasions, and we're all here to tell the story. (But) to think that this is unprecedented is probably inaccurate." Banks and insurers , which potentially have large exposure to euro zone debt, were among the biggest fallers. Sentiment was already at a low ebb after Moody's ratings agency said after Wall Street closed on Wednesday it might cut the U.S. rating if lawmakers failed to agree to raise the country's debt ceiling. Man Group shed 2.9 percent as HSBC cut its recommendation on the world's largest listed hedge fund manager to "underweight" from "neutral". Lloyds Banking Group , however, found some support, up 1 percent, as Goldman Sachs upgraded the UK bank to "buy", with the broker bullish about Lloyds's longer-term prospects. Miners and integrated oil stocks fell as doubts over the sustainability of a sluggish global economic recovery caused investors to look at the demand outlook. Rio Tinto , down 0.8 percent, fared a little better than its mining peers, as Investec reinitiated coverage on the miner with a "buy" rating after the global miner reported it is on track to hit its 2011 iron ore production target. Bucking the weaker trend was precious metals miner Fresnillo , which rose 2.6 percent after it posted record silver and gold production in the second quarter at a time when the gold price is at a life-time high. Oil services firm Petrofac fell 3.3 percent with traders citing a downgrade by Barclays Capital to "underweight". On the upside, Associated British Foods added 3.1 percent, topping the list of FTSE 100 risers , after the food and retail group reported it is on track to meet its full-year earnings targets, prompting Panmure Gordon to raise its recommendation to "buy" from "hold". Kingfisher rose 0.9 percent buoyed by a bullish JPMorgan note in which it starts the firm at "overweight" with a 329 pence price target. Rolls-Royce climbed 0.8 percent, after upbeat notes on the engine maker from both JPMorgan and BofA Merrill Lynch. Shire added 1.5 percent, third top gainer after Goldman Sachs said the growing attention deficit hyperactivity disorder (ADHD) market in the United States presents the drugmaker with a source of opportunity. There was no important UK data scheduled for release on Thursday, but in the U.S., June retail sales are due at 1230 GMT, along with weekly jobless claims and June producer prices, while May business inventories will come out at 1400 GMT.
