* FTSE down 0.1 percent after late rally from lows
* Banks weak; drugmakers hit by broker downgrades
* Oils rally as crude price firms
By Jon Hopkins
LONDON, Sept 23 (Reuters) - Britain's leading share index ended slightly lower on Thursday, rallying late on in tandem with a turnaround on Wall Street after U.S. existing home sales data, with firmer oils offset by weak drugmakers and banks.
By the close, the FTSE 100 was down 4.83 points or 0.1 percent at 5,547.08, its third consecutive session of losses since hitting its highest close since late April on Monday.
"If you look at the charts, it does still look like it is forming an upward channel, so whether this is a little blip with the market wearing bad days for a while ... but generally it looks well supported, although low volumes remain a concern," said Phil Gillette, a senior trader at Spreadex.
Weak drugmakers were the main drag for the blue chips, with AstraZeneca and Shire down 1.1 and 0.8 percent, respectively, after Exane BNP Paribas cut ratings for both in a sector review.
The broker upgraded its stance on GlaxoSmithKline but the stock still fell 1 percent on concerns that U.S. and European regulators were set to pull its controversial diabetes drug Avandia off the market.
Banks were also big blue chip fallers, with Lloyds Banking Group and Barclays off 1.0 and 0.3 percent, respectively, as uncertainty over what steps governments will need to take to sustain the economic recovery weighed.
Debate on the Bank of England's Monetary Policy Committee is in a particularly aggressive and vigorous phase as policymakers struggle to assess the relative strength of upside and downside risks to inflation, BoE Chief Economist Spencer Dale said on Wednesday.
U.S. blue chips were 0.1 percent higher by London's close as disappointing weekly jobless numbers were countered by a recovery in U.S. existing home sales in August.
The dollar retreated helping commodity prices extend recent gains as the prospect of extensions to quantitative easing programmes fuelled demand for metals and crude oil.
Integrated oils were the best blue chip performers, with BG Group adding 1.8 percent and Royal Dutch Shell ahead 0.2 percent.
Miners saw some support led by gold miner Randgold Resources , up 1.1 percent, while Xstrata and Vedanta Resources both took on 0.9 percent.
OIL SERVICES UP
Also among the blue chip gainers, oil services stocks stood out after recent bid activity in the sector, supported by a bullish note from JP Morgan Cazenove.
The broker said it sees signs of a broad and sustainable earnings upgrade trend for pan-European oilfield services.
Petrofac was the top blue chip riser, up 2.1 percent, while Amec gained 1.8 percent.
Fund manager Schroders was also a blue chip riser, up 1.7 percent helped by rumours of sector consolidation moves.
Mid cap peer Aberdeen Asset Management gained 2.4 percent on talk Japan's Mitsubishi might be interested in upping its current 10 percent stake in the firm.
But Henderson Group missed out on the sector boost, losing 5 percent after Citigroup cut its rating to "hold".
Despite the recent retreat, the FTSE 100 remains up around 400 points since its late September low of 5,109.40, and 700 points higher than its 2010 low in early July.
"Technical factors ensure equities are supported even if like Wile E. Coyote they are pedalling furiously in mid-air having run of the end of a cliff," Jeremy Batstone-Carr, head of research at Charles Stanley, said. (Additional reporting by David Brett; editing by Jon Loades-Carter)