FTSE hit by downgrades; Friends up on bid rebuff

LONDON, March 31 (Reuters) - The FTSE 100 .FTSE of Britain's leading shares edged lower on Monday as a series of downgrades weighed on sentiment, but Friends Provident FP.L gained after rejecting a takeover offer.

At 0749 GMT the blue-chip index was down 78.2 points, or 1.4 percent at 5614.7.

The FTSE is down more than 13 percent for the year on concerns about a U.S. recession, and is on course for its worst quarter since the third quarter of 2002 and its third consecutive quarter of losses.

On the downside, Vodafone (VOD.L) slipped 6.6 percent to top the losers' list after Morgan Stanley downgraded the shares to "underweight" from "overweight" and cut its price target to 170 pence from 215 pence. British Airways BAY.L lost 4 percent after a downgrade from Goldman Sachs and warning that travellers at Heathrow airport's new Terminal 5 in London face more delays from teething troubles with the computerised baggage handling system.

ITV (ITV.L) slid 6.7 percent after UBS downgraded the British broadcaster to "sell" from "neutral" and reduced its price target to 60 pence from 70 pence.

Among banking stocks, which together accounted for 15 negative index points, Barclays (BARC.L) fell 2.8 percent following Exane BNP Paribas's lowering of its price target to 675 pence from 725 pence.

HSBC (HSBA.L) was 0.7 percent lower after a rebel shareholder again urged Europe's biggest bank to sell its U.S. business, saying if it did not the unit may have to file for Chapter 11 protection from creditors. [ID:nL30137323]

The mood within the sector was little helped by renewed worries over asset writedowns at Swiss bank UBS (UBSN.VX).

"It was quite strange last week because the U.S. markets were weak but the FTSE was managing to push its way up, so everyone was expecting a return to reality," said David Jones, chief market strategist at IG Index. "These downgrades aren't really helping...that's having an impact."

U.S. stocks fell on Friday as a profit warning from J.C. Penney (JCP.N) raised concerns about slowing consumer spending, while persistent worries about credit-related problems throttled financial stocks. Japan's Nikkei .N225 lost 2.3 percent on Monday.

FRIENDS PROVIDENT BID REJECTION

Bucking the downward trend, insurer Friends Provident gained 3 percent after it rejected a 3.5 billion pound ($7 billion) cash takeover offer from U.S. private equity firm JC Flowers because it said the bid significantly undervalued the company. [ID:nL31542064]

Among pharmaceuticals, AstraZeneca (AZN.L) climbed 1.6 percent after it decided to stop a clinical trial of its blockbuster cholesterol-lowering Crestor early because of the clear benefits of the medicine compared to placebo.

The so-called Jupiter study was designed to see if giving Crestor to patients with no sign of pre-existing cardiovascular disease and low to normal levels of "bad" LDL cholesterol but raised C-reactive protein (CRP) would reduce heart attacks and other major cardiovascular events. (Additional reporting by Rebekah Curtis, editing by Elizabeth Fullerton)