FTSE loses 0.2 pct; weak oils offset firm miners

* Energy issues fall as crude reverses gains

* Miners rebound helped by consolidation hopes

* UK May manufacturing output unexpectedly shrinks

By Jon Hopkins

LONDON, July 7 (Reuters) - Britain's top share index lost 0.2 percent on Tuesday as falling oil stocks, disappointing UK industrial output data and an early slide on Wall Street offset strength in miners.

At the close, the FTSE 100 .FTSE was 7.91 points lower at 4,817, a two-month low, after losing 1 percent on Monday. The index is up over 20 percent since hitting a six-year low in March but is still down 5 percent for the year.

"Thin trade, Wall Street's drop and UK factory production numbers suggesting we are still in the grip of a recession put a dampener on FTSE's earlier rally," said Mic Mills, senior trader at spread betters ETX Capital.

British manufacturing output unexpectedly shrank in May, falling 0.5 percent on the month, official data showed, making it less likely the economy returned to growth in the second quarter. [ID:nONS004337]

Oil issues were mostly lower after an earlier bounce by crude Clc1 was snuffed out. BP (BP.L) held on to gains of 0.2 percent, but BG Group (BG.L), Royal Dutch Shell (RDSa.L) and Cairn Energy (CNE.L) fell 0.3 to 1.3 percent.

Miners, however, provided a prop for the FTSE 100 index, reversing recent losses against a backdrop of stabilising metals prices and sector consolidation hopes.

Traders noted speculation that a $1 billion capital-raising by Brazilian group Vale VALE.SA might be used for a tie-up with Xstrata (XTA.L) to help in its battle to take over Anglo American (AAL.L). Last year Vale called off plans to take over Xstrata.

Xstrata gained 1.4 percent, while Anglo American slipped 0.1 percent, with Eurasian Natural Resources (ENRC.L), Rio Tinto (RIO.L), Antofagasta (ANTO.L), Vedanta Resources (VED.L), and Kazakhmys (KAZ.L) up 1.7-2 percent.

Banks were mixed, with Barclays (BARC.L) and Standard Chartered (STAN.L) extending Monday's sector rally, adding 1.1 and 1.8 percent, respectively. Standard Chartered was helped by an upgrade from Goldman Sachs to "buy" from "neutral".

But Lloyds Banking Group (LLOY.L), Royal Bank of Scotland (RBS.L) and HSBC (HSBA.L) shed 0.2 to 2.4 percent.