March 2, 2018 / 5:13 PM / in 9 months

UPDATE 1-FTSE hits Dec. 2016 low as May's Brexit speech fails to inspire

* FTSE down 1.5 pct at close

* GKN eyes sale of auto unit (Recasts, adds detail, quote and updates prices at close)

By Julien Ponthus and Kit Rees

LONDON, March 2 (Reuters) - The UK’s top share index hit its lowest level in more than a year on Friday on concerns over trade disputes and as a speech by Prime Minister Theresa May left many unconvinced that a post-Brexit deal with the EU was any closer.

At its close, the FTSE was down 1.5 percent at 7,069.90 points at its lowest since December 2016, unnerved by President Donald Trump’s promise to tax aluminium and steel imports.

While initial reaction to May’s speech was muted, both the blue chip FTSE 100 and sterling drifted lower as it ended with the prim minister saying “no deal is still better than a bad deal in Brexit talks”.

“There wasn’t much for traders to latch on to,” said David Madden, market analyst at CMC Markets UK, adding that ‘no deal’ could prove costly.

The FTSE usually rises when sterling falls owing to the FTSE’s high proportion of internationally-exposed firms, which benefit from a weaker local currency.

London-listed steel producer Evraz was down 0.9 percent, as fears of rising U.S. protectionism and an escalating trade war with Asia hit the share prices of European steelmakers.

Shares in miners Rio Tinto and BHP Billiton, which have large iron ore exposure, were more than 3 percent lower and among the biggest FTSE 100 fallers.

Rentokil rebounded after falling during the previous session on disappointing 2017 results. The British business services group gained 3.6 percent.

Paper and packaging firm Mondi was the biggest gainer, up nearly 4 percent after announcing a special dividend after resuming profit growth.

London Stock Exchange Group fell 2.7 percent after reporting its 2017 results as traders noted higher costs.

British engineering company GKN was down 3.5 percent. It said it was in talks with Dana Incorporated over its auto unit, opening up a new front in an attempt to fight off a hostile 7 billion pound ($9.6 billion) bid from Melrose Industries. (Reporting by Julien Ponthus and Kit Rees; editing by John Stonestreet)

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