FTSE creeps higher as drugmakers gain; BoE eyed

                                
 * FTSE 100 up 0.2 percent, retreating from 5-month high
                                
 * Banks fall, Man Group up on bid talk
                                
 * BoE, ECB interest rate decisions awaited
                                
 
                                
 By Simon Falush
                                
 LONDON, Oct 7 (Reuters) - Britain's top share index gained
slightly by midday on Thursday as stronger pharmaceuticals
outweighed falls in banks, with moves muted as investors awaited
interest rate decisions.
                                
 By 1022 GMT, the FTSE 100 <.FTSE> was 8.91 points or 0.2
percent higher at 5,690.30 after it gained 0.8 percent on
Wednesday, a five month closing high.
                                
 The Bank of England is expected to leave interest rates on
hold again on Thursday, with all 61 analysts polled by Reuters
expecting rates to stay at 0.5 percent.
                                
 But the outcome may conceal a three-way split between
policymakers, arguing for the first time since November whether
economic conditions justify a tighter or looser policy.
                                
 "People will be looking to see if quantitative easing has
been discussed by the MPC," said David Morrison, market
strategist at GFT Global.
                                
 "Quantitative easing has put pressure on the dollar which
has pushed up asset prices and that's been behind much of the
gains in equities."
                                
 The dollar fell to a 15-year low versus the yen and an
all-time low against the Swiss franc on the prospect of more
money-printing by the U.S. Federal Reserve. [FRX/]
                                
 Risk-sensitive banks were the biggest drag on the index as
investors rotated out of the sector after heavy buying in recent
sessions. Barclays <BARC.L> fell 0.3 percent while Lloyds
Banking Group <LLOY.L> fell 1.8 percent.
                                
 Antofagasta <ANTO.L> was among the top fallers, down 2.5
percent after Citigroup cut it to "sell" from hold, citing
valuation grounds.
                                
 The European Central Bank will also give its latest interest
rate decision on Thursday, although again no changes are
expected to euro zone monetary policy.
                                
 Moves are likely to be relatively muted ahead of nonfarm
payrolls on Friday. Economists forecast a fall of 54,000 jobs,
but anything much higher than this could trigger a sell-off
after recent hefty gains.
                                
 Man Group <EMG.L> was the top blue-chip performer, jumping
over 5 percent, with traders citing talk of bid interest from a
U.S. investment bank. Its shares are 15.5 percent higher this
week.
                                
 Defensive pharmaceuticals stocks were also higher with
AstraZeneca <AZN.L> up 0.9 percent and GlaxoSmithKline <GSK.L>
up 0.7 percent.
                                
 In a sign that parts of the UK economy are struggling to
move into recovery mode, British house prices plunged a record
3.6 percent in September, mortgage lender Halifax said on
Thursday. [ID:nLAC005771]
                                
 Marks & Spencer <MKS.L> results also hinted at the tough
times ahead for the UK economy. The retailer fell 0.9 percent
despite beating forecasts as it said trading conditions would
get tougher as austerity measures hit consumers. [ID:nLDE695205]
                                
 But British manufacturing output rose for a sixth
consecutive month in August and by its fastest annual rate in
over 15 years, easing fears the economy is on the verge of a
sharp downturn. [ID:nLDE6960WC]
                                
 The U.S. data focus will be on the latest weekly jobless
numbers, due at 1230 GMT, another indicator for Friday's nonfarm
payrolls.
 (Editing by Elaine Hardcastle)