* FTSE 100 index drops 0.5 percent
* Banks knocked by European debt contagion concerns
* Miners weak as metal prices fall
* Kingfisher hit by double broker downgrades
By Simon Falush
LONDON, Nov 26 (Reuters) - Persistent anxiety on Europe's debt crisis dented banks and commodity stocks on Friday, dragging Britain's top share index lower, though gains from defensive pharmaceuticals and tobacco stocks limited losses.
Telecoms giant BT Group also provided some support to the index gaining 4.4 percent after the firm said it is to sell a 5.5 percent stake in Indian IT services group Tech Mahindra.
The FTSE 100 ended 30.23 points lower, or down 1.6 percent at 5,668.70, but it bounced off a low just below 5,600 set earlier in the session.
Banks were the worst blue chip performers on Friday, led by Royal Bank of Scotland, down 5.3 percent, as worries about European sovereign debt contagion refused to evaporate.
European officials denied "absolutely false" reports Portugal was under pressure to seek a bailout and Spain ruled out on Friday needing help to manage its finances, despite fears of a spreading euro debt crisis.
But the lingering worries on the state of Europe's debt pile kept riskier assets in retreat.
"It's a strange situation. There aren't really signs that the economy is turning sour but the fears of a return to a sovereign debt crisis mean that its all about political noises coming out of European peripherals," said Gilles Moec, senior European economist at Deutsche Bank.
Miners suffered as metal prices fell reversing a recent rally on concerns about tightening trading conditions and with China interest rate concerns continuing.
Antofagasta was the weakest of the bunch, down 3.8 percent, while Vedanta Resources lost 3.2 percent.
CHARTIST GLOOM
The FTSE 100 is down 1.1 percent this week, its third consecutive week in negative territory and technical analysts said charts point to plenty of scope for further weakness.
"The downside breakout of the 20-day moving average has dampened the bullish sentiment and tarnished the short term outlook," said Nicholas Suiffet, an analyst at Trading Central.
"As long as the former highs reached in early November are not surpassed, the risk will remain on the downside. Expect a further correction move towards the support base around 5,440 and 5,330," Suffiet said.
Among individual UK blue-chip fallers, DIY retailer Kingfisher shed 2 percent. Traders cited the impact of a downgrade by BofA Merrill Lynch to "underperform" from "neutral" with an unchanged 230 pence price target.
Investec Securities also cut its stance on Kingfisher to "sell" from "hold" in a review of British general retailers in which it downgraded the sector overall to "underweight".
However, Marks & Spencer added 0.4 percent as Investec raised its rating to "buy" from "hold" in the review.
Capital Shopping Centres was the top riser, up 5.3 percent as speculation mounted that Simon Property may bid for the company after it made a potential offer on Nov. 24. (Additional reporting by Jon Hopkins; Editing by Jon Loades-carter)