FTSE slips as Vale ditches Xstrata, pharmas fall

                                
 By Dominic Lau
                                
 LONDON, March 26 (Reuters) - Britain's top share index edged
down on Wednesday as Xstrata <XTA.L> sank after the collapse of
talks with Brazil's Vale <VALE5.SA> to buy the miner and
drugmakers fell after bearish comments from Morgan Stanley.
                                
 By 1145 GMT, the FTSE 100 <.FTSE> was down 25.2 points, or
0.4 percent at 5,663.9, though index heavyweight Vodafone
<VOD.L> offered some support, up 2.8 percent after it said it
expected to start receiving dividends from its U.S. joint
venture Verizon Wireless next year.
                                
 The UK benchmark index has fallen 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 and its third straight quarter
of losses.
                                
 Analysts said that despite some bad news, shares were
holding up reasonably well.
                                
 "Things don't look so bad today, given the size of
yesterday's rally and the news on Xstrata," said Tim Hughes,
head of sales trading at IG Index. "The optimism does seem to be
hanging in there."
                                
 Xstrata was down 7.8 percent after Vale said talks to buy
the Anglo-Swiss rival had failed.
                                
 The rest of the sector, however, traded higher as metal
prices stayed firm and after Kazakhmys <KAZ.L> said 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.
                                
 Kazakhmys rose 4 percent, while Anglo American <AAL.L> added
3.7 percent, Lonmin <LMI.L> put on 3.1 percent and Antofagasta
<ANTO.L> advanced 2 percent.
                                
 Banks were among the standout losing sector, with Barclays
<BARC.L>, HSBC <HSBA.L>, Royal Bank of Scotland <RBS.L>, HBOS
<HBOS.L> and Standard Chartered <STAN.L> losing between 0.7 and
1.5 percent.
                                
 Bank of England Governor Mervyn King said tighter lending
conditions had made the central bank more inclined to cut
interest rates as the credit crunch entered a new and difficult
phase.
                                
 Also weighing on the sector, Germany's Deutsche Bank
<DBKGn.DE> said the disruption to revenues and writedowns on
assets stemming from global credit turmoil could put its profit
goal for this year at risk.
                                
 Elsewhere in the financial sector, Friends Provident <FP.L>
rose 1.1 percent after the Financial Times said JC Flowers was
working on a fresh approach to the life assurer.
                                
 
                                
 BROKERAGE
                                
 AstraZeneca <AZN.L> dropped 2.6 percent and GlaxoSmithKline
<GSK.L> lost 2 percent after Morgan Stanley cut its price target
on both stocks.
                                
 Sainsbury <SBRY.L> added 3.3 percent after its fourth
quarter like-for-like sales excluding fuel came in above
expectations and said it saw "strong growth" in sales of
non-food items.
                                
 The supermarket group also said it had signed a property
joint venture worth 1.2 billion pounds with British Land
<BLND.L>.
                                
 U.S. durable goods and new home sales data for February will
provide a further gauge of the health of the world's largest
economy with the first figures due from 1230 GMT.
                                
 Aviva <AV.L>, BSkyB <BSY.L>, Wolseley <WOS.L>, Capita Group
<CPI.L>, InterContinental Hotels <IHG.L> and Smiths Group
<SMIN.L> were all down as they traded without the right to
dividend.
                                
 (Editing by Sue Thomas)