FTSE down despite M&A as U.S. data weighs; BoE eyed

By Michael Taylor

LONDON, Feb 4 (Reuters) - Britain's leading shares ended lower on Monday as M&A activity featured but jitters over the global economy weighed ahead of the Bank of England (BoE) rate-fixing meeting later this week.

The FTSE 100 .FTSE ended 3.0 points or 0.1 percent lower at 6,026.2, after suffering a midsession setback as fears over the state of the U.S. economy were heightened by data showing new factory orders rose less than expected in December.

"The recession fears are always going to be there," said Joshua Raymond, a sales trader at City Index. "A lot of clients I've spoken to are pretty convinced that there are two different stories going on: the U.S. and European one.

"The sense is that the European economy is a lot stronger than the U.S. and therefore there is a chance that they could withstand it, but at the moment ... the spill-off into Europe (equities) has been a lot stronger and potentially overdone."

Banks, which have recently picked themselves up from taking a beating in January, accounted for 15 positive index points. High climbers included HBOS (HBOS.L: Quote, Profile, Research), Lloyds TSB (LLOY.L: Quote, Profile, Research) and Barclays (BARC.L: Quote, Profile, Research), all up by more than 1 percent.

But Royal Bank of Scotland (RBS.L: Quote, Profile, Research) surged 4.3 percent to top gainers, after a weekend report that the bank could sell assets including its minority stake in Bank of China (3988.HK: Quote, Profile, Research) if a deepening crisis on the market forces it to raise fresh capital, analysts said.

In other banking news, Northern Rock NRK.L reversed earlier gains to fall 0.5 percent after investment firm Olivant quit the race to rescue the ailing British bank.

Olivant's withdrawal leaves billionaire Richard Branson's Virgin Group [VA.UL] and an "in-house" management team as the only possible suitors, ahead of today's government set deadline.