Miners drag down FTSE as Greek uncertainty weighs

"The fact that we have not seen a large sell-off suggests investors, though cautious, remain optimistic a deal will be done," Jimmy Yates, head of equities at CMC Markets, said.

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He said defensives remain a safer option, despite lagging in 2012, alongside a little hedging in cyclical shares as a deal for Greece is awaited.

Citigroup said it expects Greece to avoid disorderly default but raised the chances of a Greek euro area exit in the next 18 months to 50 percent from 25-30 percent.

With those concerns in the background, investors continued to take profits on miners <.FTNMX1770>, which have led the FTSE 100 higher in 2012, rising more than 21 percent.

Xstrata fell 2.9 percent with some investors disappointed at the premium offered by Glencore in its $90 billion (56 billion pound) "merger of equals" with the miner.

Glencore, the world's largest diversified commodities trading house, will issue 2.8 new shares for each Xstrata share, representing a 15.2 percent premium to Xstrata shareholders when some analysts had been calling for a minimum 20 percent premium.

In other M&A news, British banking software firm Misys , which announced it is in talks with Swiss rival Temenos on Friday, fell 4.5 percent as Berenberg Bank cut its rating on the UK-listed firm to "hold" from "buy" on valuation grounds.

"Our standalone valuation of both businesses suggests that both are richly valued, with the quality of earnings at Temenos an increasing concern," the bank said, with Misys having gained 45 percent since December.

BP SLIDES

Other cyclicals retreated too, with heavyweight BP down 1.5 percent after saying exports of Azeri gas from the Shah Deniz platform stopped late on Monday after a technical problem.