FTSE slips as oil price fall saps energy stocks

* Anglo American gains after proposed merger with Xstrata

* Other miners, energy stocks weighed by cheaper commodities * Banks, drugmakers fall; BA slips on pension worries

By Simon Falush

LONDON, June 22 (Reuters) - Britain's top share index shed 1.2 percent by midday on Monday as energy stocks and miners were dragged lower by weaker commodity prices, but Anglo American (AAL.L) rose on Xstrata's (XTA.L) proposed merger talks.

By 1037 GMT, the FTSE 100 .FTSE was down 54.92 points at 4,291.01 after gaining 1.5 percent to close at 4,345.93 on Friday.

Anglo American was the biggest blue chip gainer, up 5.9 percent, after rival Xstrata said it wanted talks about a proposed merger of equals, worth about $68 billion, seeking increased scale and cost synergies.

Xstrata fell 4.1 percent and Lonmin (LMI.L) slipped 4.9 percent as investors speculated that Xstrata could sell its 24.9 percent stake in the miner as the result of the proposed merger. Other miners fell in the face of weaker metal prices. Rio Tinto (RIO.L), Kazakhmys (KAZ.L), Eurasian Natural Resources (ENRC.L) and BHP Billiton (BLT.L) were all in negative territory.

"Everything's a little lacklustre and we are lacking any impetus or stimulus to push equities higher," said Jim Wood-Smith, head of research at Williams de Broe.

Energy firms were weaker as oil fell towards $68 per barrel CLc1, hurt by a weaker U.S. dollar and falling equities.

BP (BP.L), Royal Dutch Shell (RDSa.L), BG Group (BG.L), Tullow Oil (TLW.L) and Cairn Energy (CNE.L) fell between 2.4 and 3.6 percent.

The FTSE 100 is up 23.9 percent since touching a six-year trough in early March but it is still down 3.3 percent on the year.

"Now as we come into the summer period, in the absence of any positive news, we are likely to trend sideways," said Richard Hunter, head of equities at Hargreaves Lansdown.

PROPERTY BLUES

Emphasising the bleak economic backdrop, asking prices for homes in most of Britain fell in June after four months of rises, property website Rightmove said on Monday.

Average asking prices of properties new to the market fell 0.4 percent this month, after rising 2.4 percent in May, Rightmove said. The annual rate of decline eased to 5.5 percent, its lowest since last October, from 6.2 percent in May. [ID:nLAG003522]

Banks were broadly weaker. Barclays (BARC.L), HSBC (HSBA.L), Standard Chartered (STAN.L), and Royal Bank of Scotland (RBS.L) fell 0.2 to 1.6 percent but Lloyds Banking Group (LLOY.L) added 0.9 percent.

Drugmakers also fell, retreating from some gains made last week. GlaxoSmithkline (GSK.L) fell 0.2 percent and AstraZeneca (AZN.L) fell 1.1 percent.

British Airways (BAY.L) was the biggest large-cap loser, down 6.5 percent after newspapers reported that the airline has clashed with its pension fund trustees over a higher-risk investment strategy.

Medical equipment manufacturer Smiths Group (SMIN.L) was among a select group of stocks in positive territory, up 1.7 percent after Deutsche Bank upgraded its rating for the medical equipment group to "buy" from "hold" and increased its target price.

There is little in the way of major economic data coming out of the UK this week so the main macro focus will be across the Atlantic, most notably on the latest two-day Federal Reserve Open Market Committee meeting which begins on Tuesday.

With interest rates at rock-bottom, no changes are anticipated from the Fed, though any comments on the progress of quantitative easing moves and signs of recovery in the economy would be welcomed by the market.

The FTSE 100 index had a slightly different make-up on Monday as the latest quarterly reshuffle took effect, with London Stock Exchange (LSE.L), 3i Group (III.L), and Wolseley (WOS.L) all making a return to blue chip status after one quarter in the mid caps. (Reporting by Simon Falush; Editing by Hans Peters)