UK's FTSE hit by fall in financial stocks
* FTSE 100 down 0.5 pct
* Market trims losses after U.S. jobs data
* Smith & Nephew rises after forecast-beating results
* Weak UK manufacturing data weighs on FTSE
LONDON, Aug 1 (Reuters) - Financial stocks underperformed as Britain's top equity index fell to a three-week low on Friday, while weak UK manufacturing data also weighed on the market.
The blue-chip FTSE 100 index was down by 0.5 percent, or 30.20 points, at 6,699.91 points before the close of trading.
The FTSE trimmed some of its earlier losses after U.S. job growth slowed in July and an unexpected rise in the unemployment rate pointed to some slack in the labour market that could give the Federal Reserve room to keep interest rates low for a while.
But the London stock market remained bogged down in negative territory.
Traders said data on Friday showing that British manufacturing grew at its slowest pace in a year in July was keeping investors on the back foot.
"The mode is to sell on any rallies," said Beaufort Securities sales trader Basil Petrides.
A fall in major financial stocks took the most points off the FTSE, with the FTSE 350 Banking Index down by 0.7 percent as Royal Bank of Scotland fell 1.2 percent.
The part-nationalised bank reiterated on Friday that a vote by Scotland to become independent from the rest of the United Kingdom could significantly increase its costs.
Investec analyst Ian Gordon cut his rating on RBS to "sell" from "hold", arguing that RBS still faced pressures from litigation costs and impairment charges.
Healthcare group Smith & Nephew rose 3.7 percent after posting higher profits and sales that beat the consensus forecast.
The FTSE 100 hit a 2014 peak of 6,894.88 points in mid-May which marked its highest level since December 1999. Many traders had expected the FTSE to hit a record high of 7,000 points but its failure to breach the 6,900 mark so far this year has led some traders to book profits above the 6,800 level.
Marcus Bullus, trading director at MB Capital, said he could buy back into the FTSE if the index recovered to rise above its 200-day exponential moving average level. This level is currently at the 6,686 point level and can be used by technical traders as a sign to buy if an index breaks above that point.
"I don't want to call the bottom here because you could get burnt badly, but if we see a day or two of buyers moving the market back higher, I could get back in," said Bullus. (Additional reporting by Francesco Canepa; Editing by Catherine Evans)