Banks lead FTSE lower, investors eye U.S. payrolls

* FTSE down 0.1 percent

* Banks sag as RBS and HSBC report results

* Defensives gain, investors cautious ahead of U.S. payrolls

By David Brett

LONDON, Nov 5 (Reuters) - Britain's top share index fell on Friday as investors locked in gains after the previous session's sharp rise, with banks down after results from HSBC and Royal Bank of Scotland.

The market's main focus will be on U.S. nonfarm payrolls, due at 1230 GMT, which are expected to have risen by 60,000 in October, after a 95,000 decline in the previous month, with the unemployment rate seen static at 9.6 percent month-on-month.

U.S. stock index futures pointed to a lower open on Wall Street on Friday, ahead of the data.

By 1150 GMT, the FTSE 100 <.FTSE> was down 4.93 points or 0.1 percent at 5,857.86, having shot up 2 percent on Thursday.

That was its highest closing level in nearly 29 months, following the Fed's commitment on Wednesday to buy $600 billion in government bonds to support a struggling U.S. economy.

"The markets may have some upside left in them before the year-end, but right now it's looking like a case of too far, too fast," Ben Critchley, sales trader at IG Index, said.

"Add to that the fact we have got the non-farm payrolls out of the U.S. this afternoon, and the accompanying volatility this brings makes the idea of booking profits seem prudent."

Banks <.FTNMX8350> were the main losers, having risen sharply in the run up to and after the Fed announcement.

Royal Bank of Scotland dropped 3.7 percent after reporting third-quarter results. It said it expected challenging market conditions in the fourth quarter and saw a UK bank tax adding up to 250 million pounds to its costs next year [ID:nLDE6A31SL].

Europe's biggest bank HSBC fell 1.8 percent with traders citing profit-taking after it said profits in the third quarter and for the year to date were "well ahead" of a year ago. [ID:nLDE6A409P]

"(HSBC's) results are good ... but then in the last couple of days it has had a very good run," a London-based trader said. "I think there's money being taken off the table here, and that's pushing some of these banks back down again."

DEFENSIVES SUPPORT

Drugmakers were among the top performers on the FTSE 100, as investors switched out of riskier assets and into perceived defensive issues, for the time being.

GlaxoSmithKline was up 2.8 percent and peer AstraZeneca rose 0.3 percent, while Smith & Nephew added 6.2 percent after the orthopaedic products firm reported third-quarter results. [ID:nLDE6900KC]

Invensys climbed 1.5 percent as both Morgan Stanley and Societe Generale hiked their target prices for the engineering group following results on Thursday.

Back on the downside, Rolls-Royce shed 3.3 percent after planemaker Airbus said it was asking airlines that fly its A380 superjumbos to have Rolls-Royce engines inspected. This follows the engine failure this week of an A380 operated by Qantas Airways . [ID:nLDE6A409X]

Among retail stocks, Wm Morrison Supermarkets dropped 1.3 percent, extending the previous session's falls when it issued a cautious outlook. [ID:nLDE6A21DD]

On the economic front, British factory gate inflation slowed more than expected to a six-month low in August after oil prices eased, but evidence that wheat prices are pushing up food costs clouded an otherwise rosy picture. [ID:nLDE6890OS]