FTSE ticks up as banks offset weak Vodafone, oils
* Banks top-weighted gainers as FTSE gains 0.2 pct
* BAE Systems gains on Goldman note
* UK GDP contracts more than previously thought in Q3
By Dominic Lau
LONDON, Dec 23 (Reuters) - Britain's top share index inched up 0.2 percent on Tuesday, with banks offsetting losses in Vodafone (VOD.L) and oil producers, though volumes were light on the last full trading day before Christmas.
The FTSE 100 .FTSE closed 6.82 points higher at 4,255.98, after rising as high as 4,307.09. The UK benchmark has fallen 34 percent this year on concerns of a deep and painful global recession, triggered by a meltdown in risky U.S. subprime mortgages.
Activity was light, with just over 578 million shares changing hands. That compared with Monday's 767 million and last week's daily average of 1.12 billion.
"Who knows what the new year holds but I think there is a bit of confidence coming back to the market," said Mark Foulds, a senior trader at ETX Capital.
The UK market will end trading on Wednesday at 1230 GMT and will remain close until Dec. 29.
Banks were the top-weighted gainers, with HSBC (HSBA.L), Standard Chartered (STAN.L), Barclays (BARC.L), Lloyds TSB (LLOY.L) and Royal Bank of Scotland (RBS.L) up between 0.2 and 4.6 percent.
Britain edged closer to recession in the third quarter, with the economy contracting by more than previously thought and at its sharpest rate since the early 1990s. [ID:nLN438486]
The number of mortgages approved for home purchase in Britain slumped to a fresh record low in November, with the seasonally-adjusted number falling to 17,773 -- almost 61 percent down on the same time last year. [ID:nLN393684]
Deutsche Bank said in a note that it forecast UK house prices falling by a total of 35 percent from peak to trough, which it expected at the end of 2010.
Across the Atlantic, the U.S. economy shrank at a 0.5 percent annual pace in the third quarter as expected.
STAY DEFENSIVE?
BAE Systems (BAES.L) advanced 3.7 percent after Goldman Sachs reiterated its "buy" rating in a review of the European aerospace and defence sector.
Rolls-Royce (RR.L) put on 1.8 percent after it announced a $575 million deal with Etihad Airways to supply and maintain Trent 770EP engines for eight Airbus (EAD.PA) A330 aircraft.
Killik & Co said in a note that drugmakers and tobacco firms were among its top picks, highlighting AstraZeneca (AZN.L), GlaxoSmithKline (GSK.L) and Imperial Tobacco (IMT.L).
"Rather than embracing the rallies in 2009, investors are likely to treat any short-term stock market recovery with scepticism, fearing it is only a temporary respite from the long-term bear market," said Mick Gilligan, head of research at Killick.
"In this environment, the key is to hold stocks that will participate in the rallies but where we won't lose our shirt if the upturn proves short lived," he said, adding that Vodafone (VOD.L) and Cobham (COB.L) would fit the bill.
Heavyweight Vodafone, however, was down 3.5 percent.
Oil producers were also weaker, with Royal Dutch Shell (RDSb.L) off 1.6 percent, BG Group (BG.L) easing 0.4 percent and Cairn Energy (CNE.L) down 0.2 percent.
Miners were generally firmer. Anglo American (AAL.L), Xstrata (XTA.L) and Rio Tinto (RIO.L) put on between 0.8 and 3.3 percent.
Among individual movers, confectionery group Cadbury (CBRY.L) added 1.1 percent after Investec upgraded its earnings estimates, due to foreign exchange benefits.
