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* FTSE 100 closes down 1.7 pct
* Miners hit by commodity price fall
* WPP drops on China comment
* HSS plummets after price-target cuts
* Betfair gains on merger talk (Updates with closing prices)
By Liisa Tuhkanen
LONDON, Aug 26 (Reuters) - Britain's top share index sank onWednesday, not far from its lowest closing levels since the endof 2012, as fears about Chinese growth gnawed and a commoditiessell-off rattled markets across Europe.
Data showing an unexpected pick-up in UK retail sales and anincrease in mortgage approvals offered encouraging signals onthe domestic economy but failed to stem selling.
The FTSE 100 index closed down 1.7 percent, to5,979.20 points, broadly in line with falls in Europeanequities.
The index posted its biggest one-day rise since 2011 onTuesday after China cut interest rates to calm markets. Butinvestors quickly resumed their focus on the deterioratingoutlook for China's economy and its impact on others.
London-listed miners Fresnillo and Randgold fell between 4.6 and 7 percent after gold and copper pricesfell. Glencore dropped 3.7 percent.
Some fund managers said they were looking at buyingopportunities. More short-term investors said they were sellingout of positions taken earlier this week.
"On a short-term basis, I am willing to increase my risk andbuy. I believe the market is offering opportunities,"AllianceBernstein portfolio manager Michele Patri said.
"But medium-term the situation looks complex. When you seehow stocks exposed to global growth are performing, you canreally see how investors do not have faith in the outlook."
Shares in advertising group WPP fell 2 percent afterthe group said trading in China had been "weak" in the secondquarter compared with the first. The group reiterated it was ontrack to hit its full-year sales target, however.
Support services firm Carillion fell 3.7 percent, despitesaying it was on track for an increase in revenue this yearafter it posted a strong first half, boosted by contracts won in2014 and orders secured in 2015.
Among smaller companies, HSS Hire plummeted 39percent after the tool and equipment hire company said itexpected earnings below market expectations and as Numis and JPMorgan cut their price target for the stock.
"A second profit warning within six months of the IPO hasreduced our confidence that HSS can deliver growth ratessignificantly ahead of the market," Numis said in a note.
On the upside, shares in mid-cap Betfair soared 20percent after the online gambling company and Irish rival PaddyPower said they had reached an agreement in principleon a possible merger, marking the latest in a string of possibletie-ups across the sector. (Editing by Louise Ireland)
