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* FTSE 100 down 0.2 pct
* Banks weigh as Fed indicates rate hike caution
* Kingfisher drops 3.8 pct on B&Q disappointment
* Fresnillo, Randgold rise as gold gains
* Lowered guidance sends Hikma down 8 pct
LONDON, Aug 17 (Reuters) - Banks wilting on the prospect of slower U.S. rate hikes dented Britain's major share index on Thursday, as Kingfisher also weighed after a weaker quarterly sales performance.
The FTSE 100 fell 0.2 percent, heading for its first down day this week, following the lead of European indexes which edged back after a set of cautious minutes from the U.S. Federal Reserve.
Banks RBS, Standard Chartered, and HSBC were among the biggest fallers, helping financials take 11 points off the index overall after several Fed members called for halting interest rate hikes after recent weak inflation.
Banks benefit from higher interest rates which bolster their margins, and the prospect of slower rate hikes dented the sector globally. The FTSE 350 banking index, which had outperformed the FTSE 100 recently, fell back 1.2 percent.
Index levels were little changed after retail sales data which showed a slowing in July after a strong second quarter.
Europe's largest home improvement retailer Kingfisher fell 4 percent after it reported another decline in quarterly sales, weighed by its B&Q business in the UK and weak sales in French chains Castorama and Brico Depot.
"As feared, the impact of the UK housing slowdown is now more clearly apparent, with B&Q second quarter like-for-like sales undershooting expectations at -4.7 percent," said Jefferies analysts.
The retailer's "discount" valuation would likely persist for now, they added, as the mid-term potential for improvement in its French segment was diluted by short term risks at B&Q.
Gains from gold miners Randgold and Fresnillo , up 2.6 to 3.4 percent, capped losses for the index as gold prices edged up, benefiting from a weaker U.S. dollar.
Admiral stumbled again after Wednesday's sharp results-driven losses.
Meanwhile mid-caps held steady, though results weighed on Hikma.
The drugmaker fell 8.7 percent after it cut its revenue guidance for the year, saying increased competition in its generics business hit prices and volumes for its first half.
Aerospace and defence engineering firm Qinetiq jumped 6.5 percent after Barclays upgraded it to overweight, saying recent share price weakness provided an opportunity.
They added, however, that valuations for the UK capital goods sector were demanding, perhaps influenced by investors' strong dislike for consumer-related stocks.
(Reporting by Helen Reid; Editing by Toby Chopra)