UK blue chips have closed lower, having extended losses in afternoon deals following a weaker start on Wall Street, with UK mining and oil stocks weighing heavily.

The FTSE 100 index closed down 87.6 points at 5,362.3, off a low of 5,345.1, while the FTSE 250 index was 182.6 points lower at 9,007.2.

Oil stocks were in the doldrums after recent falls in the oil price.

Oil is down more than $20 per barrel since hitting a record above $147 just weeks ago.

BP closed 9.25 pence lower at 512.5, while Royal Dutch Shell slipped 36 pence to 1,790, and BG Group closed 72 pence lower at 1,068.

Earlier Thursday, BG Group said it is to sell Contact Energy as part of a takeover bid.

The gas producer also reported on Thursday an increase in profits in the second quarter, with net profit before disposals and one-off items for the quarter to June up 97 percent to 807 million pounds, ahead of forecasts.

Sticking with commodities, weakness was seen among miners as metals prices retreated.

Eurasian Natural Resources was the worst off -- and the day's second worst blue chip performer -- down 66 pence -- or 6.5 percent -- at 949, with Xstrata off 207 pence at 3,215, Lonmin, down 154 pence at 2,415, Vedanta Resources, 93 pence lower at 1,791, BHP Billiton, 76 pence lighter at 1,540, and Rio Tinto, down 4,905 pence at 195.

Also dragging on the FTSE 100 were the banks. "I think the weakness has come after the U.S. housing and unemployment figures. Also Fannie Mae and Freddie Mac were down, so I think there's just general weakness," said Mark Priest from tradindex.com.

Barclays was down 4 pence at 348, HBOS lost 3.5 pence to 301.5, and Lloyds TSB shed 8.5 pence to 338, with the latter having been cut to 'hold' from 'buy' by Citigroup earlier.

Back with the blue-chip fallers, Scottish & Southern Energy closed 55 pence lower at 1,390.5, after it said it expects profits for the first half to be "substantially lower" than the strong first halves of 2006 and 2007.

Turning to the gainers, Kingfisher headed up the FTSE 100 leaderboard after Europe's biggest home improvement retailer reported an unexpected return to underlying sales growth at its B&Q business in the United Kingdom along with better-than-expected gross margin growth, sending its shares up 7.6 pence -- or 6.51 percent -- at 124.3.

This rise came despite the group noting the market remains "extremely tough" and stressing it is still "cautious" about the consumer outlook.

But weakness was seen elsewhere among retailers after the office for National Statistics said retail sales in June dropped by 3.9 percent, more than reversing the upwardly adjusted 3.6 percent increase recorded for May.

Tesco was down 6.8 pence at 376.5, Sainsbury fell 3.5 pence to 308, and Morrison was off 9 pence at 264.75.

Returning to the risers, Rolls-Royce added 2.5 pence to 371.25 after announcing an 8 percent rise in underlying half-year pretax profit and said it is confident of delivering profitable growth and positive cash flow for the full year.

British Energy also ended higher, up 42.5 pence -- or 6.2 percent -- at 728.5, after the group confirmed on Thursday it is in advanced takeover discussions with one party.

A source confirmed to Thomson Financial News the UK nuclear group is in sole discussions with French energy firm EDF.

The UK nuclear firm's statement came in response to recent speculation about the status of its talks with third parties.

Elsewhere in the sector, British Airways ended as the top blue-chip faller, off 21.25 pence -- or 8.07 percent -- at 242, after recent gains.