* FTSE 100 falls 0.6 percent
* Banks slip, U.S. data, Ireland jitter hurt
* Invensys gains on China rail deal
By Simon Falush
LONDON, Sept 17 (Reuters) - Financials and energy stocks dragged Britain's top share index lower by the close on Friday as weak U.S. confidence data and worries over Ireland's finances prompted investors to edge out of riskier assets.
The FTSE 100 index ended 31.69 points or 0.6 percent lower, at 5,508.45, having retreated from significant gains earlier in the session.
It fell for a third day having lost 0.3 percent on Thursday, but it eked out a 0.1 percent gain for the week, it's fourth week in positive ground.
U.S. consumer sentiment fell to its weakest level in more than a year, a private survey showed, as worries over jobs and finances intensified.
Earlier, the government said consumer prices increased slightly more than expected in August, but core prices were flat.
Banks, which are sensitive to slight changes in risk appetite, took most points off the index while other financial stocks also suffered. Barclays fell 3.2 percent and hedge fund company Man Group fell 4.4 percent.
"You can't expect it to go up in a straight line and the data gave people an excuse to take profits," said Philip Poole, global head of macro investment strategy at HSBC Global Asset Management.
"But I think there will be further upside because its less likely that there will be a double dip than there will be low but sustained growth."
The cost of insuring Irish sovereign debt against default hit a record high and the Irish/German spread reached a euro lifetime peak after the Irish Independent newspaper said Ireland was "perilously close" to calling in the IMF and the EU.
The Irish authorities and the IMF sought to downplay any such prospects, but markets were slightly unsettled and equities fell.
Insurers were also hurt by the slight retreat in risk appetite. Aviva fell 0.9 percent while Old Mutual lost 2 percent.
ENERGY DRAIN, POWER LIFT
Energy stocks were also weaker as crude fell by more than 1.5 percent to below $74 per barrel. BP fell 1.3 percent.
Aggreko was the top blue-chip riser, up 4.1 percent as Credit Suisse started coverage on the temporary power supplier, albeit with a "neutral" stance.
Engineering group Invensys was also a strong gainer, up 3.2 percent after the firm announced its rail unit had signed a deal with Chinese manufacturer CSR, increasing its exposure to the rapidly growing Asian economy.
"We expect further collaborations to be announced which would logically cover mainline and high speed and this, in turn, underlines the pivotal position Invensys rail is developing for itself," Evolution Securities said in a note.
Food retailer Sainsbury, up 1.7 percent was boosted by a UBS upgrade to "buy" from "neutral"
Defensive stocks were not exempt from the sell-off, with drugmaker Shire and utility Scottish & Southern Energy down 3 and 2.1 percent respectively.
Britain's top share index is expected to barely rise between now and the end of 2010, but will bounce 8 percent by mid-2011 as support from overseas earnings offsets worries about the economy, a Reuters poll showed. (Editing by Hans Peters)