* FTSE 100 falls 0.5 percent
* Smiths Group falls on Merrill downgrade
* Unilever rises on U.S. haircare firm purchase * UK GDP, U.S. consumer confidence eyed on Tuesday
By Tricia Wright
LONDON, Sept 27 (Reuters) - Britain's top share index closed lower in directionless trade on Monday, with Smiths Group out of favour, hurt by a downgrade from BofA Merrill Lynch, while Unilever rose after a U.S. acquisition.
The FTSE 100 closed down 25.06 points, or 0.5 percent, at 5,573.42, after gaining 1.6 percent last week.
"The lack of any economic data and corporate news has really meant that we're a very directionless market today. Tomorrow things pick up a bit with (UK) GDP and U.S. consumer confidence," Angus Campbell, head of sales at Capital Spreads, said.
Broker recommendation and target price changes were behind some of the individual equity moves. Smiths Group shed 1.6 percent after BofA Merrill Lynch cut its rating for the engineering group to "neutral" from "buy" in a review of the UK Capital Goods sector.
The broker said it downgraded Smiths Group due to the stock's re-rating and high U.S. but low emerging market sales exposure, while leaving its target price unchanged at 1,350 pence.
Software firm Sage Group, meanwhile, topped the blue-chip leader board, while peer Autonomy was another good gainer after Barclays Capital initiated coverage on the European Software/IT services sector with a 1-Positive view.
"We believe, as a late cyclical sector with increasing corporate IT investments and easy comps, the sector has the potential for relative outperformance vs the market in the coming months," BarCap said in a note.
Sage, which BarCap started as "equal-weight", and Autonomy, which the broker initiated as "overweight" and counts among its top picks, advanced 3.1 percent and 1.6 percent respectively.
A price target hike from Goldman Sachs helped miner Kazakhmys climb 1.5 percent.
The UK benchmark is up 6.7 percent this month, rebounding from falls in August, but market watchers said this recent rally could be running out of steam.
Manoj Ladwa, senior trader at ETX Capital said: "5,600 seems to be a level of resistance for the FTSE... unless we get decent newsflow coming out over the next few weeks... the market will probably retrace somewhat, maybe down sub-5,500 before it starts back up again."
M&A BOOST
Unilever climbed 1.3 percent after the consumer goods group agreed to buy United States-based hair care group Alberto Culver Co for $3.7 billion in cash to boost its personal care business.
On the downside, Wolseley lost 0.7 percent after the world's largest plumbing, heating products and building materials supplier posted flat year profit. It said it plans to move its tax status to Switzerland in search of tax savings.
British house prices rose at their slowest annual rate in seven months in September, as prices fell monthly in all regions for the first time in almost 1-1/2 years, according to a survey by property data firm Hometrack.
Banks were also weaker, down 0.8 percent.
And AstraZeneca lost 1.6 percent after the company's experimental prostate cancer pill zibotentan failed to improve survival in a late-stage clincial trial, dealing a fresh blow to its oncology pipeline. (Editing by David Cowell)