BP, banks pull FTSE lower, GDP, earnings support

* FTSE 100 slips 0.3 percent, BP down on heavy volume

* Wolseley, Man Group results firm

* Data at end of week eyed for return to gains

By Simon Falush

LONDON, March 29 (Reuters) - Weakness from banks and BP , hit by a downgrade, dragged Britain's top share index lower on Tuesday though it outperformed European peers, helped by updates from Man Group L> and Wolseley .

A slightly better than forecast final reading of British fourth-quarter GDP also capped losses.

By 1047 GMT the FTSE 100 <.FTSE> was down 18.64 points, or 0.3 percent, at 5,885.85. It closed up 0.1 percent on Monday.

Volumes were thin, with investors reluctant to take sizeable new bets as the quarter-end approaches.

Shares in oil major BP were the sharpest fallers on the index after a media report that the company's managers may face manslaughter charges following the Gulf of Mexico oil spill and an analyst downgrade. [ID:nLDE72S0YR]

BP fell 2.2 percent on volumes over twice the market average and contributed to nearly half the weakness of the index, though it is still 58 percent higher than a trough reached in June last year in the wake of the spill. [ID:nLDE72S0NG]

Investors see potential for further strength, after the index's best performance since November last week, with a raft of data in the next few days giving a potential further boost.

"It's a big data week with the (U.S. non-farm) payrolls on Friday and that could see us get more positive momentum," Steven Bell, director at the $600 million GLC hedge fund said.

Strengthening the view that corporate profits look set to be fair, Wolseley , the world's largest plumbers and builders merchant, posted a 64 percent rise in half-year trading profit and reinstated its dividend.

It was the top gainer, up 2.1 percent.

MAN UP

Hedge fund firm Man Group added 0.5 percent after it posted adjusted pretax profit of $560 million for the year to March and said it expects $700 million of net inflows in the three months to March.

Clothing retailer Next added 1.9 percent, with traders citing a bullish note from Morgan Stanley as the catalyst, in which they say the broker keeps its "overweight" stance on the firm and raises its target price to 2,800 pence from 2,470 pence.

The index trimmed losses after data showed Britain's economy contracted by slightly less in the final three months of 2010 than statisticians had earlier estimated, due to broad-based upward revisions to a range of sectors. [ID:nAHLSEE7EZ]

Phil Roberts, chief European technical strategist at Barclays Capital, said the fact it had closed above its 100-day moving average for two consecutive days provided grounds for optimism that it could break through resistance.

"There is potential to move if we manage to close above the two-thirds retracement of the fall from February to March of 5,934 -- the same level the market collapsed from -- we could move back to 6,052 and the highs for the year around 6,100."

Banks, which drove most of the gains in the previous session, retreated, with Barclays down 1.4 percent.

The sector was weighed after Italy's UBI Banca's surprise announcement of a 1 billion euros ($1.4 billion) capital hike to help repay a government bond. Analysts said there were concerns others could follow suit.

Across the Atlantic, U.S. March consumer confidence data is due at 1400 GMT, and the January Case-Shiller house price index is out at 1300 GMT.

Highlighting investor nerves associated with strife across the Arab world and the ongoing nuclear crisis in Japan, defensive tobacco stocks were among the top gainers, with British American Tobacco up 1.4 percent.

"The flight to the most defensive sector of them all could be a sign of impending overall weakness in the equity market," Manoj Ladwa, senior trader at ETX Capital, said. (Editing by Mike Nesbit)