* FTSE 100 flat ahead of ECB
* Tullow Oil boosted by UBS upgrade
* Miners drop with copper on China stimulus disappointment (Adds quotes, details, updates prices)
By Alistair Smout
LONDON, April 3 (Reuters) - British blue-chip shares steadied after testing a three-week high on Thursday, as the end of a two-week rally in mining shares offset gains by Tullow Oil.
Market moves were muted, however, before a meeting of the European Central Bank, as investors waited to see if the ECB would act in the face of deflation fears.
The British FTSE 100 gave up a 0.2 percent gain, which took it to its highest since March 12, to trade roughly flat at 6,657.00 by 1046 GMT.
“The UK flagship index FTSE 100 has encountered some resistance ... which is understandable given the 2 week rally from 6500 and the all-important ECB policy decision this afternoon and US jobs report tomorrow,” Mike van Dulken, head of Research at Accendo Markets, said in a trading note.
Tullow Oil led the risers with a 5 percent gain. Traders said the move came after UBS upgraded its rating on Tullow to “buy” from “neutral”.
Trading volumes in the stock stood at a four-fifths of the stock’s three-month daily average at 1030 GMT - greater than the FTSE 100, which were only a quarter of its average.
Kingfisher rose 2.3 percent after Europe’s biggest home-improvement retailer began a 275 million-euro ($378.6 million) takeover bid for France’s Mr Bricolage, moving to strengthen its position in its most profitable market.
Analysts at Oriel Securities said the acquisition made strategic sense and the deal should help earnings in 2016.
Mining stocks weighed on the market, though. The sector fell 0.6 percent, after rising 6.8 percent over the last two weeks.
Heavyweight copper miners such as Rio Tinto and Anglo American took the most points off the index. Copper prices weakened after Chinese stimulus measures fell short of expectations.
Attention is likely to shift to euro zone monetary policy as the ECB holds its regular meeting. The central bank is expected to keep interest rates steady and offer no new stimulus for the euro zone’s fragile economies. However, analysts the market might still fall back if the ECB does not act.
“I think actually we need either a rate cut or a specific liquidity measure today - I think if we just get talk, there will be a slight negative response,” said Peel Hunt equity strategist Ian Williams.
Any action the ECB takes would probably boost euro zone shares more British stocks. It might help to extend the outperformance of the region’s periphery against UK blue chips so far this year.
The FTSE 100 is down 1.4 percent for 2014, compared with a 14.9 percent rise in the Italian FTSE MIB.
Just as investors have been betting on an economic rebound in continental Europe, British stocks have suffered from their defensive composition, as well as turmoil in emerging markets during the first quarter.
“UK weakness can be put down to mainly the performance of defensives within the UK, where you have big defensive industries with big overseas earners. The strength of sterling has impacted earners there,” Jonathan Stubbs, head of European equity strategy at Citi, said.
$1 = 0.7263 Euros Additional reporting by Tricia Wright; Editing by Larry King