LONDON (Reuters (LSE: TRIL.L - news) ) - The blue-chip index ended lower on Friday during a relatively quiet session as banking stocks slipped following a bearish Goldman Sachs (NYSE: GS - news) note and oil companies tracked softer crude prices.

The FTSE 100 <.FTSE> shed 63.8 points, or 1.2 percent, to 5,412.8 in thin trading volumes as investors took a breather following the volatile data-fuelled session on Thursday.

"If you look at the technicals and the fundamentals, people think there is still some way for it to fall, probably another 250 points before we get any recovery," said Neil Parker, market strategist at Royal Bank of Scotland (LSE: 91ID.L - news) .

"Nobody wants to be long in this market ... I would be particularly worried by a lot of inflation numbers that are coming out," he added.

The benchmark index has now notched seven consecutive weekly losses.

Goldman said in a note to clients that European banks might need to raise 60 to 90 billion euros if a turn in the credit cycle triggered losses comparable with those seen a decade ago.

The brokerage also said it had lowered 2008-2010 estimates for over 40 banks and cut price targets on a number of them, including Barclays (LSE: BARC.L - news) <BARC.L>, Royal Bank of Scotland <RBS.L>, Deutsche Bank (Frankfurt: DB9999 - news) <DBKGn.DE> and UBS <UBSN.VX>.

Royal Bank, Barclays, HBOS <HBOS.L>, HSBC (LSE: HSBA.L - news) <HSBA.L> and Standard Chartered (LSE: STAN.L - news) <STAN.L> were down between 2.1 and 4.5 percent.

"With the U.S. on holiday, the markets have taken their lead from ... a particularly bearish note from Goldman Sachs regarding banking stocks," said Ryan Kneale, an analyst at BetsForTraders.com.

Bradford & Bingley (LSE: BB.L - news) <BB.L> lost 18 percent after the mortgage lender said it planned to increase its rights issue to 400 million pounds after U.S. private equity firm TPG Capital pulled out of a plan to buy a stake.

Friends Provident (LSE: FP.L - news) <FP.L> topped the FTSE 100 losers however, down 6.9 percent after a source familiar with the matter said late on Thursday that Swiss Life (Virt-X: SLHN.VX - news) <SLHN.VX> is no longer considering a bid for Lombard, the high-end insurance unit of the insurer. Friends Provident and Swiss Life both declined to comment.

OILS SLIP

Heavyweight oil shares tracked falling commodity prices.

U.S. crude prices fell below $145, but stayed within range of the record highs hit in the previous session of just under $146 a barrel. Prices have jumped about 50 percent this year, with recent gains made on heightened tension between Israel and Iran.

BP <BP.L> fell 1 percent and rival Royal Dutch Shell (Amsterdam: RDSA.AS - news) <RDSa.L> dipped 1.3 percent, while Tullow Oil (Dublin: TQW.IR - news) <TLW.L> fell 2.2 percent.

Firm crude prices fanned existing concerns about inflation, as price pressures threaten to jeopardise earnings and curb consumer spending.

An uncertain economic outlook also continued to cast a shadow over the market. An annual discretionary income study by Ernst & Young showed the average household is now 15 percent worse off than it was five years ago.

Shares in Marks and Spencer (LSE: MKS.L - news) <MKS.L> were down 3.8 percent after hitting their lowest since late 2001 as joint house broker Citi cut its rating to "sell" from "buy" and on soft weekly sales data from rival John Lewis.

Some retail stocks rebounded however, with Tesco (LSE: TSCO.L - news) <TSCO.L>, Wm Morrison Supermarkets (LSE: MRWA.L - news) <MRW.L> and Sainsbury <SBRY.L> flat to 5.2 percent higher after being hit hard in recent sessions as traders said the shares offer short-term value.

Vague merger and acquisition hopes also buoyed the stocks, traders said.

The retail sector has been sold off heavily in recent sessions after Marks & Spencer <MKS.L> issued a shock profit warning on Wednesday.

"Volume down on the day," said Ian Hooper, an investment manager at Redmayne-Bentley. "No data, no U.S. and of course Friday afternoon no-one wants to take positions ahead of the weekend. The net result is drifting."

(Additional reporting by Dominic Lau and Atul Prakash; Editing by Paul Bolding)