Commodity weakness drives broad FTSE fall

* Commodity stocks weakened by cheaper raw materials

* Broad retreat; drugmakers, life insurers lose ground * U.S. non-farm payrolls eyed

By Simon Falush

LONDON, July 2 (Reuters) - Britain's top share index fell 1.3 percent early on Thursday, as equities fell broadly, led lower by energy and mining stocks which fell on retreating commodity prices.

Energy companies, which gained the previous session tracking higher oil prices, turned tail as crude dipped back below $70 per barrel CLc1.

BP (BP.L), Royal Dutch Shell (RDSa.L), BG Group (BG.L), Tullow Oil (TLW.L) and Cairn Energy (CNE.L) fell between 1.1 and 2.6 percent.

By 0747 GMT, the UK blue chip index was 61.08 points lower at 4,279.63 after closing 91.50 points higher on Wednesday at 4,340.71 on the first day of the new quarter.

"The market is finding it hard to gain any direction after the strong uplift in April and May," said Jeremy Batstone-Carr analyst at Charles Stanley.

"It's torn between a view that earnings forecasts for 2009 may be raised and those for 2010 may be cut."

PAYROLLS EYED

No domestic data is due for release on Thursday, so all the attention will be on the U.S. nonfarm payrolls -- bought forward a day from Friday this month due to the Independence Day holiday -- which are forecast to come in with a fall of 355,000 in June, after May's less then expected 345,000 decline.

U.S. unemployment is estimated to rise to 9.6 percent last month, up from 9.4 percent in June.

"I certainly think unemployment will continue to rise over the next few months and maybe into next year, and this will bring its own negative impact on aggregate demand," Batstone-Carr said.

Investors will also have the latest weekly U.S. jobless claims, May factory goods, and revised durable orders numbers to digest on Thursday.

And news out of the latest monthly European Central Bank Committee meeting will also be eyed, though no change is expected to monetary policy with euro zone interest rates already at a record low.

Miners were also hit by weaker demand for raw materials as metal prices slipped.

Xstrata (XTA.L), Kazakhmys (KAZ.L), Eurasian Natural Resources (ENRC.L), Anglo American (AAL.L), Lonmin (LMI.L) and BHP Billiton (BLT.L) fell between 1.1 and 4.1 percent.

Rio Tinto fell 2.6 percent after a $15.2 billion rights offer, the fifth-biggest on record, putting the world's top iron ore miner back into growth mode after a debt-funded purchase of Alcan had brought it to its knees. [ID:nSYD476934]

The dip in equity prices was broad-based with defensive drugmakers and life insurers also among those well into negative territory.

AstraZeneca (AZN.L), GlaxoSmithKline (GSK.L) and Shire (SHP.L) fell 1.1 to 1.8 percent while Aviva (AV.L) lost 3.4 percent and Legal & General slipped 1.6 percent. (Reporting by Simon Falush; Editing by Hans Peters)