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FTSE -100 index drops 106 points to 12-week closing low LONDON: Britain's FTSE 100 tumbled to its lowest close in 12 weeks on Tuesday, as bank stocks crumbled and interest rate worries eroded sentiment across the market.

With losses among heavyweight oil and drug stocks adding to the downside, the leading index ended 105.7 points or 1.7 percent lower at 6,274.1, its lowest close since November 2.

Losers outweighted gainers by three to one among blue chip stocks, with the rate-sensitive bank sector responsible for some 25 points of the fall or a quarter of the total. Lloyds TSB and Barclays both surrended four percent.

A 2.8 percent fall in oil share BP Amoco -- Britain's biggest stock -- wiped 15 points from the FTSE, while there were losses too in merging drug companies Glaxo and SmithKline Beecham .

A mixed early performance on the Dow -- which on Monday dropped to its lowest close since early January -- failed to given any clear lead and stocks were left to fret over prospects for rising rates on both sides of the Atlantic.

The Dow was up a slim five points by London s 1630 GMT close, while UK equity trading volume reached a solid 1.5 billion shares by that time, continuing the pattern of heavy trade seen so far in 2000. "There's a fear that growth is too strong within the world economy and that interest rates will have to go up," said Khuram Chaudhry, UK equity strategist at Merrill Lynch. "That doesn't bode well for equity markets."

Hawkish comments overnight from members of the Federal Reserve's rate settting committee helped spooked the market, with Federal Reserve Bank of Atlanta President Jack Guynn saying he did not see many signs that the Fed's three interest rate hikes of 1999 were slowing consumer demand.

With the Fed's next policy meeting due next week, rate worries were never going to be far from the surface, while in the UK, the Bank of England meets the following week amid expectations of a further move to tighten credit.The release tomorrow of minutes from the last Bank of England rate meeting were awaited for a clue on the thinking of bank members on the extent and timing of further moves.

Leading shares came under pressure from the outset in the wake of Monday's Wall Street decline, and by the close the FTSE 100 had scored its fifth decline of the past six sessions -- leaving it 9.5 percent below a peak set at the end of 1999.

Smaller stocks also fell, with the FTSE 250 index of mid caps down 100.4 points or 1.6 percent at 6,277.9 and the FTSE Small Cap index down 52.9 points or 1.6 percent at 3,180.6.

The techMARK 100 index of technology stocks also lost ground, falling 65.13 points or 1.6 percent to 3,920.6.

The picture was not uniformly negative, with blue chips such as natural gas producer BG and gas distributor Centrica CNA.L -- up three and four percent respectively -- benefiting from a shift towards more defensive sectors.

Telecoms group Cable & Wireless was another gainer, up four percent as bid hopes were encouraged by its agreement to pair its Hong Kong unit -- where political considerations were seen as deterring bids -- with Singapore Telecom .

Yet such positive influences were drowned out by the negatives affecting major sectors such as the banks, where Monday's bounce proved short-lived.

Anxieties over rising rates were joined by worries over a report due next month from government-appointed banking inspector Don Cruickshank on possible anti-competitive practices in the banking sector.

Oil company BP Amoco emerged as the biggest negative on the FTSE, its 2.8 percent loss carving 15 points from the index amid ongoing uncertainties over its bid for Atlantic Richfield .

Yet cyclical and engineering stocks were among the day's biggest losers as investors worries that higher rates will slow growth and crimp their profit prospects.

Building material producer Hanson was the biggest FTSE 100 casualty, down nine percent, while in the friendless engineering sector there were losses of five percent or more in aero engine maker Rolls Royce and steel producer Corus -- which reports earnings next Monday.

"We are still seeing weakness in 'old world' stocks," said one head of equity trading. "When a stock goes out of favour it can really be sold off."

Among second line engineers, Weir Group fell 10.7 percent and there were losses in TI Group and Laird . Elsewhere British Biotech turned in one of the day's worst performances, dropping 41 percent amid disappointment over the results of clinical trials of key pancreatic cancer drug marimastat.-Reuters