* FTSE falls, pausing after Friday's 2009 highs
* Banks fall; Lloyds rights issue rumours sours sector
* Miners hit hardest as profit takers move in
* Oils dip with crude falling below $71 a barrel
By David Brett
LONDON, Aug 7 (Reuters) - Britain's top share index paused for breath in early trade on Monday after hitting a 10-month closing high on Friday, with heavyweight oils, banks and miners leading the market lower.
At 0817 GMT, the FTSE 100 was down 32.22 points, or 0.7 percent, at 4,699.34, after closing up 0.9 percent, or 41.03 points, at 4,731.56 on Friday following upbeat employment data in the U.S.
With a lack of economic data for traders to chew on and the corporate earnings season largely over, investors banked profits as momentum slowed.
"There's a bit of profit taking inspired by the great week we had last week. We've had the test of the 4,700 level and there seems to be some big-figure support ... I don't expect it to go much lower," said Jim Wood-Smith, head of research at Williams de Broe.
Miners were hit hardest following a recent rally.
Rio Tinto dropped 2.5 percent after China stepped up espionage allegations against the world's second-largest iron ore miner.
Xstrata lost 2.3 percent after the company said on Sunday it is in talks that could lead to it selling a major stake in a South African mining project.
Anglo American, which is being pursued by Xstrata, Fresnillo , BHP Billiton and Antofagasta, were all dragged lower, falling 1.6-2.4 percent.
Oil majors slipped as crude prices dropped from a six-week high hit on Friday to fall below $71 a barrel.
BG Group, BP, Royal Dutch Shell and Cairn Energy shed between 0.3 and 1 percent.
Banking shares fell as sector sentiment took a dive following a report in the Sunday Times of a possible rights by Lloyds Banking Group, which fell 4 percent.
"The concept is well received ... but asking shareholders to dip into the biscuit jar for a spare 15 billion pounds may keep things quiet for a while," said Wood-Smith.
RBS was the top blue chip faller, shedding 9 percent, following on from its gloomy results published on Friday, while Barclays and Standard Chartered dipped 1.4 and 0.3 percent respectively.
INSURERS IN DEMAND
Life insurers saw demand, with Friends Provident the top blue chip riser, up 7.1 percent, after the firm said on Monday it had agreed to fresh talks with suitor Resolution.
Prudential joined the rally, up 1.6 percent, helped by weekend newspaper reports that the company is set to buck the sector trend and raise its dividend.
Old Mutual and Legal and General also attracted investors, rising 1.6 and 0.4 percent respectively.
Pharmaceuticals were the biggest winners with AstraZeneca up 0.6 percent and GlaxoSmithKline 0.4 percent higher, reflecting their perceived attractions as defensive stocks.
Rexam rose 2 percent as Credit Suisse raised its recommendation to "outperform" from "neutral" and lifted its target price to 300 pence from 278 pence,
ThomsonReuters extended recent gains, up 1.9 percent, following Thursday's upbeat results.
(editing by John Stonestreet)