Drugmakers lift FTSE 0.3 pct, banks weaken

* Drugmakers bullish ahead of Massachusetts results

* Cadbury up as it recommends improved Kraft deal

* Banks weaker after Citigroup results

By David Brett

LONDON, Jan 19 (Reuters) - Britain's top share index ended up 0.3 percent on Tuesday, led by pharmaceuticals on hopes that U.S. President Barack Obama's healthcare reforms could be hampered, while banks fell after results from U.S. bank Citigroup (C.N).

The FTSE 100 .FTSE index rose 18.75 points to 5,513.14, extending Monday's gains when the market rose 0.7 percent.

Pharmaceuticals echoed gains made by their U.S. peers after latest opinion polls in the race for the vacant Massachusetts seat in the senate suggest local Republican state senator Scott Brown could defeat state Attorney General Martha Coakley.

A Republican win could hit the Democrats' dominance in Washington and scuttle President Barack Obama's top priority of sweeping healthcare reform. [ID:nN18159712]

GlaxoSmithKline (GSK.L), AstraZeneca (AZN.L) and Shire (SHP.L) rose 0.4-1.7 percent.

Democratic leaders crafting a final health reform bill have asked drugmakers to pay at least $10 billion more to help fund the overhaul but no agreement has been reached, industry sources said on Thursday. [ID:nN14234163]

"The healthcare issue has certainly excited the markets both here and in New York," said Jimmy Yates, head of equities at CMC Markets.

The Dow Jones .DJI and S&P 500 .GSPC were around 0.7 percent higher as London closed.

"Better volumes after the U.S. returned from its holiday on Monday has given us a clearer picture of sentiment among investors" Yates said.

Commodities reversed earlier losses as investor appetite for risk returned.

Oil majors BP (BP.L) and Royal Dutch Shell (RDSa.L) gained 0.7 and 0.1 percent respectively.

Miners joined the rally as platinum and palladium prices struck their highest levels since mid-2008 on Tuesday, with investment demand fuelled by the recent launch of exchange-traded funds in the United States.

Lonmin (LMI.L), Rio Tinto (RIO.L), Fresnilo (FRES.L), Xstrata (XTA.L) and BHP Billiton (BLT.L) added 0.1 to 0.8 percent.

CADBURY SWEET ON KRAFT

Cadbury CBRY.L was a big riser, adding 3.6 percent after it recommended shareholders accept an offer from Kraft (KFT.N) valuing the chocolate maker at around 840 pence per share or 11.9 billion pounds ($19.2 billion), plus investors will also get a 10 pence dividend. [ID:nL9294700]

Burberry (BRBY.L) was the strongest gainer, up 8.3 percent after the luxury goods group smashed third-quarter revenue forecasts and predicted annual profit towards the top of market expectations. [ID:nLDE60H0SK]

Mobile phone heavyweight Vodafone (VOD.L) provided the most strength for the blue chips, rising 1.3 percent after recent weakness and helped by an upgrade in target from BofA Merrill Lynch.

On the downside, banks were the main drag on the UK blue chip index, as sentiment ebbed after Citigroup's (C.N) fourth-quarter results and ahead of Bank of America (BAC.N) and Morgan Stanley's (MS.N) results due on Thursday.

Barclays (BARC.L) fell 1.8 percent as Credit Suisse also cut its target price to 350 pence from 400.

HSBC (HSBA.L), Lloyds Banking Group (LLOY.L) and Standard Chartered (STAN.L) shed between 0.1 and 2.6 percent.

Citigroup (C.N) posted a $7.6 billion quarterly loss on costs related to repayment of U.S. TARP aid and still high loan losses. [ID:nN19205676]

SABMiller (SAB.L) was a big faller, down 2.3 percent, after the brewer missed forecasts as it reported flat third-quarter worldwide underlying beer volumes amid varied regional consumer demand. [ID:nLDE60H0QO] (Editing by Greg Mahlich)