FTSE flat, BA and Iberia consider merger

* BA and Iberia boards consider merger

* BT update sees telecoms rise

* Oils down as crude slips, miners weaker

By David Brett

LONDON, Nov 12 (Reuters) - Britain's FTSE 100 .FTSE index was flat at midday on Thursday, although British Airways soared after news that its board was meeting to consider a merger with Iberia, and defensive stocks were mostly firmer, offsetting weakness in cyclical commodity stocks.

At 1222 GMT the FTSE 100 .FTSE was up 0.09 points at 5,266.84. The index ended 0.7 percent higher on Wednesday, having touched an intraday high at a level not seen since September 2008.

"A combination of Cadbury CBRY.L/Kraft, RIO Tinto (RIO.L)/BHP Billiton (BLT.L) and BA/Iberia, all these potential M&A stories are all drivers," said Manus Cranny, senior market commentator at MF Global.

"The newsflow has been reasonably positive. Lloyds (LLOY.L) has seen extra demand for their convertible bonds from their bond holders, which says to me that the market, underlined, is reasonably optimistic," he said.

British Airways BAY.L rose 7.2 percent and Iberia IBLA.MC climbed 9.2 percent after the airlines confirmed their boards were holding separate board meetings to consider a merger to create the world's third largest airline by revenue. [ID:nLC092017]

Telecoms notched up good gains in the wake of BT Group's (BT.L) second-quarter results. BT added 4.9 percent while Vodafone (VOD.L) added 1.4 percent and Cable & Wireless CW.L rose 0.6 percent.

BT increased its revenue and dividend forecast for the full year after stringent cost cuts helped the former telecoms monopoly to beat second quarter core earnings expectations. [ID:nLB181504]

Pharmaceutical giant GlaxoSmithKline (GSK.L) gained 1.8 percent as Barclays Capital initiated coverage with an "equal weight" rating, whileUBS also chipped in by hiking its target price for GSK.

Banks were generally higher as investors bought into Standard Chartered (STAN.L) and Lloyds Banking Group (LLOY.L), which rose 0.3 and 0.6 percent respectively.

Barclays (BARC.L), up 1.5 percent, rebounded from falls seen since its third-quarter trading update on Tuesday, as Morgan Stanley and ING both lifted their price targets for the firm.

But traders took profits on Europe's largest bank HSBC (HSBA.L) down 0.4 percent following its third-quarter update on Wednesday, and state-supported Royal Bank of Scotland (RBS.L) fell 3.8 percent extending losses for the third consecutive day.

COMMODITIES FALL

Energy stocks dipped as the crude oil price CLc1 fell below $79 dollars a barrel, having been up above $80 on Wednesday.

BG Group (BG.L), BP (BP.L) and Royal Dutch Shell (RDSa.L) dropped 0.6 to 1.6 percent.

Investors banked profits on miners, which advanced on Wednesday after strong Chinese economic data, with Fresnillo (FRES.L), BHP Billiton (BLT.L), Rio Tinto (RIO.L) and Xstrata (XTA.L) dropping 0.7 to 1.7 percent.

Eurasian Natural Resources (ENRC.L) fell 3.6 percent after releasing third-quarter output numbers. [ID:nLC367843]

Among individual movers, 3i Group (III.L) shed 4.3 percent in the wake of its first-half results. The British private equity firm said asset values increased just 2 percent in the first half of its financial year as the real economy failed to keep up with rebounding stock markets. [ID:nLB267369]

Investors' attention will turn to the U.S. later in the day, with weekly jobless claims due at 1330 GMT, and results from retail mammoth Wal-Mart WMT.L and Walt Disney Co (DIS.N).

U.S. futures pointed to a softer opening on Wall Street after the Dow and the Standard & Poor's 500 indexes closed at 13-month highs in the previous session.

Futures for the S&P 500 SPc1, Dow Jones DJc1 and Nasdaq 100 NDc1 were down 0.4-0.5 percent on Thursday morning. (Editing by Greg Mahlich)