FTSE dips on concerns over Libyan unrest

* FTSE down 0.3 pct

* MidEast, N.Africa political unrest dents confidence

By David Brett

LONDON, Feb 21 (Reuters) - Britain's top share index dipped on Monday as concerns over political unrest in major oil-producer Libya weighed on sentiment, prompting a flight from risk and pressuring commodity stocks.

By 1154 GMT, the FTSE 100 <.FTSE> index was down 17.37 points, or 0.3 percent, at 6,065.62, hovering near recent 32-month highs, with the U.S. market closed on Monday for the Presidents Day holiday.

Losses were capped, however, as investors fought a tug-of-war between the growing conviction in the outlook for the global economy and concerns over unrest in Libya and the wider North Africa and Middle East region. "Tactically, bond markets are due a rebound and equity markets might see a little profit-taking," Mike Lenhoff, chief strategist at Brewin Dolphin, said.

"However, improving fundamentals are likely to push bond yields higher and deliver the earnings to support the momentum underlying equity markets."

Energy stocks <.FTNMX0530> fluctuated as crude oil rose 2 percent on fears that the political unrest could disrupt oil supplies. [ID:nLDE71F0BK]

"The situation is a tough one near term and does create uncertainty, but can be seen in a positive light as we're potentially going from a series of dictatorships to democracy," Keith Bowman, an analyst at Hargreaves Lansdown, said.

BP suspended preparations for exploratory drilling for oil and gas in western Libya due to growing unrest in the north African country. [ID:nWLB4737]

BP also agreed to buy a 30 percent stake in 23 oil and gas blocks owned by Reliance Industries , India's most valuable listed conglomerate, for $7.2 billion. [ID:nSGE71K07T]

BANKING PROFITS

Banks <.FTNMX8350>, which rose 2.3 percent last week after solid results in the sector including from Barclays , were the biggest fallers. UK banks have risen around 10 percent since the start of the year.

Royal Bank of Scotland , which reports later this week, was down 2.2 percent.

Minutes from the Bank of England's rate setting meeting are due out on Wednesday, with investors looking for clues as to how close the voting was for a rise in interest rates.

"We suspect a rate hike will have limited impact on the overall equity market," Nomura analysts said in a note, adding rate rises look set to begin in May.

Miners <.FTNMX1770> fell as investors risk appetite faded and after Beijing on Friday raised banks' required reserves by 50-basis points, showing no let-up in a campaign to combat inflation. [ID:nTOE71H068]

Precious metal miners Fresnillo and Randgold Resources , however rose 5.2 and 3.2 percent respectively as gold climbed to a seven-week high as spreading unrest in the Middle East burnished the metal's appeal as a safe haven.

Centamin Egypt was up 6.4 percent after the company said a sit-in protest of workers at its flagship Sukari gold mine was minor. [ID:nLDE71H1WN]

Invensys rose 4 percent after the Observer newspaper reported on Sunday the British engineering firm is being eyed as a potential takeover target by several international rivals, citing "city sources". [ID:nLDE71J0DI]

Anglo-French mall owner Hammerson added 4.3 percent after posting a 17.6 percent rise in full-year net asset value.

Mid-cap chipmaker CSR fell 7.4 percent after it agreed to buy U.S group Zoran Corporation .

Ocado shed 6.6 percent following management share sales and worries of increased competition from Waitrose.

(Editing by Erica Billingham)