* FTSE 100 index flat, consolidates at 4-1/2 year peak
* HSBC leads rally by UK banking stocks
* Vodafone again lends blue chips its strength
* Capita knocked by Canaccord downgrade
By Jon Hopkins
LONDON, Jan 28 Strength in banks driven by
global lender HSBC supported Britain's top share index
at mid-session, with the index flat and consolidating at its
highest level in four-and-a-half years.
At 1149 GMT, the FTSE 100 index was up 0.40 points,
or 0.01 percent at 6,284.85, having traded in a 5 point range
all morning after gaining 0.3 percent on Friday to reach its
highest level since mid-2008.
The FTSE 100 has risen by some 6.5 percent since the start
of 2013 - a bigger rise in January than the index achieved in
the whole of 2012, when it rose 5.9 percent.
"London's blue chip index has enjoyed its best start to the
year for more than two decades (not bad considering it only
turns thirty next year), and today we sit less than 10 percent
from the all-time high," said Will Hedden, sales trader at IG.
"Equities are in rude health, and analysts are rushing to
talk up their quality and call the start of the next bull
"What puzzles many is that we have come so far from 2008
lows, yet only now are we contemplating the start of a great
period for equities - one in which 7,000 and new territory
looks very possible for 2013," Hedden added.
HSBC's advance added almost 5.0 points alone to the FTSE
100, with the stock up 1.0 percent, helping the UK banks
gain 0.7 percent.
The sector has been buoyed by Friday's news that banks will
repay early 137 billion euros of crisis loans taken a a year ago
from the European Central Bank, and which ECB President Mario
Draghi has said "avoided a major, major credit crunch".
The bigger-than-expected repayment was seen as a sign that at
least parts of the financial system are returning to health.
Other financial stocks also took heart from the move, with
insurer Old Mutual the top FTSE 100 gainer, up 1.1
percent. Prudential added 0.8 percent and Aberdeen Asset
Management rallied 0.9 percent.
Market heavyweight Vodafone was also a big
contributor to keeping the FTSE 100 steady, up 0.8 percent and
alone adding more than 2.5 points to the index as the telecoms
firm extended its advance into a third consecutive session.
Traders have cited talk that the mobile telecoms group may
sell its stake in its U.S. wireless joint venture to partner
Verizon as the main reason behind the rally.
Outsourcing group Capita was a big blue chip faller,
down 1.9 percent, with traders citing the impact of a Canaccord
Genuity rating downgrade to "sell" from "hold".
The broker said it expected Britain's coalition government
may look elsewhere than Capita when handing out its next batch
of contracts, which could impact the company.
"Capita is a well-managed business that still achieves high
returns on operating assets. But the attractions of its
investment case have diminished," Canaccord said in a note.
Capita was one of the most-traded blue chip stocks, with its
volume at almost 50 percent of its 90-day daily average by
midday, compared with overall FTSE 100 volume of 20 percent.
Falls by energy heavyweight BG Group knocked the most
points off the FTSE 100 index, with its 1.4 percent decline
accounting for 2.0 index points. Traders cited moves by
investors to book profits after recent renewed bid speculation
for the company drove the stock higher last week.
Technical indicators suggesting a pause in BG's recent gains
also led some investors to cash in on recent gains, traders add.
British newspaper reports last week stoked long-standing
speculation that BG might be a target for a rival such as Royal
Dutch Shell, although traders remain sceptical over the
likelihood of any such deal happening.
"I've taken a little bit of profits. There's been a lot of
bid speculation for them and there's just some natural
profit-taking now," said Hartmann Capital trader Basil Petrides.
Royal Dutch Shell gained 0.4 percent, with Credit Suisse
reiterating its "outperform" stance on the oil firm ahead of its
full-year results and 2013 strategy update due on Thursday.
(Additional reporting by Sudip Kar-Gupta; Editing by Catherine