Britain's FTSE falters on Fed comments

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* FTSE 100 drops 1.3 pct

* FTSE 250 down 1.4 pct

* Builder Kier slips 12 pct

Dec 20 (Reuters) - UK shares fell to their lowest in morethan two years on Thursday, joining a wider market selloff,after the U.S. Federal Reserve bank dampened hopes for a milderpolicy outlook even as the global economy cools.

The FTSE 100 .FTSE was down 1.3 percent at 0850 GMT afterhitting its lowest since Aug. 4 2016 in early deals. Only threestocks - Shire SHP.L , Severn Trent SVT.L and BritishAmerican Tobacco BATS.L - were in positive territory.

The mid-cap index .FTMC was 1.6 percent lower, its weakestsince September 2016 partly tugged down by lacklustre responseto builder Kier Group'sKIE.L rights issue.

The UK indexes are on track for their worst year since the2008 financial crisis, and the Fed's tone deepened concernsalready augmented by Brexit worries.

Despite calls by U.S. President Donald Trump for the Fed tostop raising interest rates, the central bank on Wednesday stuckby a plan to keep repealing support from an economy it views asstrong, sending Wall Street spiraling down.

Banks with a larger international exposure were the biggestdrags on the main index, with heavyweight HSBCHSBA.L dipping2.3 percent as the weaker U.S. dollar weighed.

The Fed news and falling greenback also knocked miningstocks, with AntofagastaANTO.L , BHP GroupBHPB.L and AngloAmerican AAL.L all down between 2.8 percent and 3.5 percent.

In news-driven moves, mid-cap construction firm Kier GroupKIE.L fell as much as 12 percent in early trade beforetrimming some of the losses as not even half of its shares werebought by shareholders in a fundraising. Its market value hasalready shrunk 64 percent this year.*:nL3N1YP2TM

Investors have dumped shares in the construction sector amidworries about mounting debts after Carillion'sCLLN.L collapseand the impact of Brexit on real estate.

Among smaller moves, AIM-listed electricity and gas supplierYu Group YU.L slumped 22 percent after it admitted to serioushistorical failures in an accounting review and said its profitwould be hit as a result. (Reporting by Muvija M and Shashwat Awasthi in Bengaluru;editing by Josephine Mason) ((; within U.S. +1 646 223 8780,outside U.S. +91 80 6749 3638; Reuters

(( For related prices, Reuters users may click on - * UK stock report .L FTSE index: 0#.FTS6 techMARK 100 index: .FTT1X FTSE futures: 0#FFI: Gilt futures: 0#FLG: Smallcap index: .FTSC FTSE 250 index: .FTMC FTSE 350 index: .FTLC Market digest: .AD.L Top 10 by vol: .AV.L Top price gainers: .NG.L Top % gainers: .PG.L Top price losers: .NL.L Top % losers: .PL.L

* For related news, click on - * UK hot stocks: [HOT and GB] Wall Street: .N Gilts report: GB/ Euro bond report GVD/EUR Pan European stock report: .EUTokyo stocks: .T HK stocks: .HK Sterling report: GBP/ Dollar report: USD/

* For company prices, click on - * Company directory: UKEQ By sector: FTAX

* For pan-European market data, click on - * European Equities speed guide................ EUR/EQUITY FTSE Eurotop 300 index........................... .FTEU3 DJ STOXX index................................... .STOXX Top 10 STOXX sectors........................ .PGL.STOXXS Top 10 EUROSTOXX sectors................... .PGL.STOXXES Top 10 Eurotop 300 sectors.................. .PGL.FTEU3S Top 25 European pct gainers.................... .PG.PEUR Top 25 European pct losers..................... .PL.PEUR ))

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