THE LARGE cap index shed 1.1 per cent yesterday, knocked by weakness in heavyweight banks, miners, and oils, but defensive stocks were back in favour once again.<br /><br />The FTSE 100 was 50.86 points lower at 4,671.34 by the close of the session, weakening for a second day after hitting a 10-month closing high of 4,731.56 on Friday.<br /><br />“Banks and miners suffered the most as investors expressed some caution ahead of the Bank of England inflation report and Fed rate decision, both due today, by booking some profits," said Mic Mills, senior trader at spread betters ETX Capital.<br /><br />Banks were the main drag, with <strong>Lloyds Banking Group</strong> the biggest faller, down 7.1 per cent on recent reports it is considering a multi-billion pound rights issue.<br /><br /><strong>Royal Bank of Scotland, Barclays, Standard Chartered</strong> and <strong>HSBC</strong> fell 0.6 to 5.5 per cent.<br /><br />The British government is understood to be close to hammering out an agreement about how to insure loans granted to RBS and Lloyds under its £580bn asset protection scheme.<br /><br />Life insurers shed some of Monday’s gains as profit takers moved in, with <strong>Aviva, Old Mutual, Legal & General</strong> and <strong>Prudential</strong> losing 4.1 to 6.0 per cent.<br /><br /><strong>Friends Provident</strong> followed the sector trend, dropping 2.7 per cent as it agreed a £1.86bn takeover from Resolution that valued the life insurer at a 6 per cent premium to Monday’s closing price. Resolution shares shed 7.6 per cent on the deal.<br /><br />Property issues fell as the sector got cold-shouldered, with <strong>British Land, Land Securities, Hammerson</strong> and <strong>Liberty International</strong> losing 3.6 to 5.9 per cent. Arbuthnot cut its rating for Land Securities to “neutral”.<br /><br />Miners and oils retreated with commodity prices. <strong>Kazakhmys, Eurasian Natural Resources, Xstrata, Antofagasta, BLT Billiton</strong> and <strong>Rio Tinto</strong> shed 1.6 to 6.0 per cent.<br /><br /><strong>BP, BG Group</strong> and <strong>Cairn Energy</strong> lost between 0.2 and 2.3 per cent, but <strong>Royal Dutch Shell</strong> managed to hold firm, adding 0.8 per cent.<br /><br />Power generation firm <strong>International Power</strong> was the top riser, up 7.3 per cent, after it reported a 12 per cent rise in profits as currency translation effects helped to offset challenging US and UK markets.<br /><br />Other utilities were also wanted as defensive attractions returned. <strong>National Grid, Scottish & Southern Energy</strong> and <strong>United Utilities</strong> were up 0.7 to 1.1 per cent.<br /><br />Tobacco issues were in demand too, with <strong>British American Tobacco</strong> and <strong>Imperial Tobacco</strong> up 0.8 and 1.0 per cent respectively.<br /><br />Drinks group <strong>Diageo</strong> gained 0.8 per cent, boosted by a Deutsche Bank upgrade to “buy” from “hold”.<br /><br />On the economic front, the goods trade gap widened slightly more than expected in June as the oil balance swung into deficit following summer maintenance work. The decline in house prices softened further, with a 10.7 per cent decline on the year in June, after a 12.7 percent annual decline the month before.