By Rebekah Curtis

LONDON (Reuters) - The leading share index fell on Wednesday after the collapse of takeover talks knocked miner Xstrata (XTA.L: Quote, Profile, Research) and banks sank on profit-taking in the wake of the previous session's roaring rally.

Xstrata shed 5.2 percent after the Anglo-Swiss miner and Vale (VALE5.SA: Quote, Profile, Research) said late on Tuesday they failed to agree on terms of what would have been one of the world's biggest takeovers, valued by some analysts at $90 billion (45 billion pounds).

Other miners traded higher as metal prices held firm. Kazakhmys (KAZ.L: Quote, Profile, Research) gained 4.2 percent after saying it welcomed a recent statement by the Kazakhstan government that it wished to take a minority interest of up to 15 percent in the miner.

The FTSE 100 .FTSE ended down 28.7 points, or 0.5 percent at 5,660.4. The UK benchmark index has fallen more than 12 percent so far this year on fears of a U.S. recession stemming from a meltdown in risky subprime mortgages, and is on track for its worst quarter since the third quarter of 2002.

"It feels like we could bump along the bottom, give or take 200 points each way, for weeks if not months," said Roger Cursley, a strategist at Investec.

"People are very bruised and very shaken up, and trying to find some positive arguments but just a bit tired of ... coming in looking at the markets," he added.

"It's become a very long drawn-out business."

U.S. stocks slid as surging oil prices raised fears about a slowdown in consumer spending and as financial shares tumbled.