FTSE edges off highs, Vodafone limits losses
* FTSE 100 falls 0.1 percent
* Miners, banks reverse Tuesday's gains
* Vodafone leads gainers on Verizon talk
* Ex-divs knock 7.6 points off index
By Tricia Wright
LONDON, March 6 (Reuters) - Britain's top shares succumbed to profit-taking on Wednesday, edging back from five-year highs, though a surge in heavyweight Vodafone limited losses.
Vodafone advanced 6.8 percent to 178.60 pence in brisk volume, alone adding 22.2 points to the FTSE 100 index, helped by renewed reports of a potential merger with its U.S. joint venture partner Verizon.
Bloomberg reported on Tuesday that the two sides had discussed options including ending the Verizon Wireless joint venture, a partial sale of Vodafone's stake or a full merger of the two firms.
With Wednesday's move pushing Vodafone well above its 200-day moving average, currently at 172.37 pence, Richard Curr, head of dealing at Prime Markets, expected a retest of the early September high - at around 183 pence - in the next 7-10 days.
The FTSE 100 ended down 4.31 points, or 0.1 percent, at 6,427.64, having earlier risen to 6,460.96, a level last seen in Jan. 2008. It was led lower by miners and banks, which were at the fore of the previous session's 1.4 percent advance.
Strategists said the recent rally, which has seen the FTSE 100 rise some 22 percent from its summer 2012 lows, could peter out, with upbeat investor sentiment running ahead of economic fundamentals.
"If you wanted this to continue you would need earnings to pick up which means you would need the (global) economy to significantly improve. We don't expect that to be the case," Fabrice Theveneau, head of equity research at Societe Generale said.
The mood was darkened by data - albeit confirming an earlier reading - which showed economic output from the 17 nations sharing the euro fell 0.6 percent in the fourth quarter of 2012, the biggest quarter-on-quarter fall in a year of contraction.
"We are seeing an increase in retail profit-taking across the board," Mike McCudden, head of derivatives at Interactive Investor, said.
"How high equities can go from here remains to be seen but with investors giddy with optimism and chasing stocks higher the danger signs in this type of trading environment are all too often ignored."
Investors were awaiting meetings from major central banks this week, with sentiment having been buoyed by assurances from U.S. Federal Reserve officials that their stimulus programme remains in place.
The Bank of England, the European Central Bank and the Bank of Japan are expected to stick with their ultra-accommodative policies at meetings this week.
"While in the short term (central banks sticking with easing measures) will certainly drive asset values higher, at some point those values have to reflect the economic fundamentals that are at play," Michael Hewson, analyst at CMC Markets, said.
Companies trading without their entitlement to the current dividend - BHP Billiton, CRH, Rio Tinto, Shire and TUI Travel - took 7.6 points off the index on Wednesday.
Among risers, engineering turnaround specialist Melrose advanced 2.7 percent after it reported a 38 percent increase in full-year profit.
Admiral climbed 5.3 percent after the car insurer posted a 15 percent rise in annual profit and raising its total dividend by 20 percent.
Results from insurer Legal & General (L&G) saw its shares advance 2 percent. It posted operating profit marginally above consensus and announced a bigger-than-expected dividend.
"Legal and General has delivered exactly what traders wanted ... an increase in full-year profits and more importantly in their full year dividend, which is up 20 percent from last year," John Truong, senior trader at Accendo Markets, said.
(Reporting by Tricia Wright, additional reporting by David Brett; Editing by John Stonestreet)