* FTSE 100 down 1.3 pct; commods, banks weigh
* BAE bucks weak market trend on share buyback
* Kingfisher dips after trading update
By Tricia Wright
LONDON, Feb 21 Britain's top share index fell on Thursday on fears the U.S. Federal Reserve could prematurely wind down its asset purchase programme, a strong contributor to the recent equity market rally.
The FTSE 100 was down 84.32 points, or 1.3 percent, at 6,311.05 by 0925 GMT, having hit a new five-year closing peak of 6,395.37 on Wednesday, led lower by commodity stocks and banks.
"U.S. liquidity concerns following the Fed minutes looks like the pin which will burst the recent bubble in equities," Mike McCudden, head of derivatives at Interactive Investor, said.
"We will see in early trade if investors still have the appetite to buy on the dips but regardless, volatility will reign in the coming sessions."
Minutes of the Fed policy meeting published late on Wednesday showed a number of officials think the central bank might have to slow or stop buying bonds.
The FTSE 100 fallers list was dominated by mining stocks as concerns about stimulus removal hit the sector, already hampered by weaker metals prices and market talk of a hedge fund liquidating big positions in commodities.
BHP Billiton was among the worst off, down 3.3 percent, extending falls from the previous session when it reported its worst profit drop in more than a decade, with Citi downgrading its rating on the stock to "neutral".
BAE Systems topped a list of only three blue-chip risers, ahead 4 percent, as investors welcomed news of a share buyback and that the company had increased its dividend by 4 percent despite posting a fall in profits.
Europe's largest defence contractor said it had started a three-year share buyback programme of up to 1 billion pounds, the full implementation of which is subject to "satisfactory resolution of Salam Typhoon price escalation negotiations".
In the current reporting season, 58 percent of STOXX Europe 600 firms have posted quarterly results so far, of which 52 percent have beaten or met forecasts, according to Thomson Reuters Starmine data.
Kingfisher, meanwhile, was left nursing a 0.9 percent fall as investors responded to a fourth-quarter trading update from Europe's biggest home improvements retailer.
Kingfisher, which trades from over 1,000 stores in eight countries in Europe and Asia, said sales at stores open over a year fell 3.4 percent in the 14 weeks to Feb. 2. That compares to a third quarter fall of 2.8 percent.
Oriel Securities cut 5 percent from its forecasts for the year to January 2014, while repeating a "reduce" rating on the shares, which it said remain vulnerable to a setback to 240 pence.
Mike van Dulken, head of research at Accendo Markets, pointed out that while the concerns about Fed stimulus have taken their toll on equities, the recent rally on the FTSE 100 has only been checked back to recent support, at 6,300.
The uptrend, he said, is still intact for now, leaving him to question whether this is "just another breather". (Editing by Hugh Lawson)