FTSE heads for biggest weekly fall in six years

* FTSE down 1.2 percent

* Banks weak on global economic woes

* Sainsbury knocked by Deutsche Bank downgrade

* Weak copper and crude weighs on commodities

By Simon Falush

LONDON, Sept 5 (Reuters) - Britain's FTSE 100 .FTSE was set for its biggest weekly fall in over six years on Friday, as jitters about the global economy hit the struggling bank sector, while falling metal and oil prices pulled commodities lower.

By 1103 GMT, the UK's blue-chip index was 68.3 points lower at 5,294.0, bringing losses for the week to around 6 percent -- the biggest such fall since July 2002.

Escalating worries about the health of the global economy were compounded on Thursday with two reports on the U.S. labour market, ahead of the closely watched non-farm payrolls report due at 1230 GMT.

"Analysts are expecting a loss of 75,000 jobs. After studying the economic reports we believe that number is too optimistic," said David Evans, market analyst at BetOnMarkets.

"If the employment data comes out soft, watch for the FTSE and all the other major stock exchanges to finish the day deep in the red."

UK banks were the biggest losers by midday, with comments from European Central Bank President Jean-Claude Trichet on Thursday adding to fears about the ability of the financial sector to weather the slowdown.

"Banks are still responding to the negative comments from the ECB and there are nerves about funding going forward," said Keith Bowman, an equity analyst at Hargreaves Lansdown Stockbrokers.

Across the Atlantic, Wall Street suffered its steepest decline in more than two months overnight on signs of weakness in the labour market, while Japan's Nikkei .N225 fell almost 3 percent earlier on Friday.

Barclays (BARC.L: Quote, Profile, Research, Stock Buzz), Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz), Lloyds TSB (LLOY.L: Quote, Profile, Research, Stock Buzz) and HBOS (HBOS.L: Quote, Profile, Research, Stock Buzz) shed between 4 and 1.9 percent.

RSA Insurance (RSA.L: Quote, Profile, Research, Stock Buzz) was a rare bright spot in the financials sector, gaining 4.8 percent as traders cited bid interest from Allianz (ALVG.DE: Quote, Profile, Research, Stock Buzz) [ID:nL5163575].  Continued...