FTSE ends flat; financials fall

A worker shelters from the rain as he passes the London Stock Exchange in the City of London at lunchtime October 1, 2008.

LONDON (Reuters) - The FTSE ended flat on Thursday as banks and miners paused for breath after recent gains, offsetting a rally in drugmakers and energy stocks.

The FTSE 100 .FTSE finished almost unchanged at 5,642.62, having closed at a 21-month closing peak on Wednesday.

Banks and miners slipped after recent strong gains, with Barclays (BARC.L), Royal Bank of Scotland (RBS.L) and Lloyds Banking Group (LLOY.L) falling 1.8 to 3.6 percent.

Miners were weighed down by weaker metals prices, which fell as the dollar strengthened. Vedanta (VED.L), Fresnillo (FRES.L), Kazakhmys (KAZ.L) and Antofagasta (ANTO.L) shed 1.7 to 2.4 percent.

Macroeconomic numbers failed to help the market. British factory orders fell faster-than-expected in March and firms were less optimistic about raising output in the coming months, confirming the UK economy's recovery from recession remains sluggish.

"With major governments refusing to do anything about their borrowing requirements, equities remain attractive. I can see the FTSE reaching the 6,000 level by July," said David Buik, senior partner at BGC Partners.

"However, once the election is over and the government starts to address its borrowing, we could easily see the FTSE finish the year around the 5,350 level."

Figures also showed public borrowing hit its highest February on record.

DRUGMAKERS BUOYANT

GlaxoSmithKline (GSK.L) was the biggest climber on the FTSE leader board, up 3.9 percent, after Novartis (NOVN.VX) handed back U.S. rights to a drug widely thought to be a generic copy of its blockbuster Advair.

This was seen as reducing the threat of cheap copies of the lung drug in Glaxo's biggest market. Peers AstraZeneca (AZN.L) and Shire (SHP.L) also rose, adding 0.5 and 1 percent respectively.

Energy stocks were also higher, led by BG Group (BG.L), up 1.5 percent on market talk of Exxon Mobil's (XOM.N) interest in the company. BG declined to comment on the talk.

BP (BP.L) and Cairn Energy (CNE.L) rose 0.4 and 1.5 percent respectively.

Among individual movers, British Airways BAY.L put on 0.7 percent as Unite union resumed talks with BA's management to try to avert a strike by cabin crew this weekend.

The firm was also given a boost as Societe Generale and UBS raised their target prices for the airline, and as press reports said that its merger deal with Iberia IBLA.MC will close next week.

Marks & Spencer (MKS.L) added 0.6 percent. The retailer has started the search for a new chairman to replace Stuart Rose, who will take a 25 percent pay cut on giving up his executive duties and step down by March 2011.

Arriva (ARI.L) rose 4.6 percent after Deutsche Bahn DBN.UL confirmed it is in talks with the UK-based train and bus operator, over a possible bid for the company.

Wellstream WSML.L climbed 6.8 percent after the Daily Mail reported mounting speculation of a potential 800 pence per share approach from Italy's ENI (ENI.MI). Wellstream declined to comment on the report.

And British electronics components distributor Premier Farnell (PFL.L) reported a return to sales and profit growth in the fourth quarter, prompting brokers to upgrade the stock and sending its shares up 9.8 percent.

In the United States, data showed jobless claims fell less than expected last week, while consumer prices were unchanged in February on lower energy prices, and factory activity growth in the U.S. Mid-Atlantic region accelerated in March.

(Editing by Elaine Hardcastle)