The top share index fell on Tuesday as Greek debt talks looked set to go to the wire, with financials leading the fallers on bearish broker comment.

London's blue-chip index <.FTSE> fell 34.98 points, or 0.6 percent, to 5,747.58 by 0902 GMT, after closing at its highest level since July 29, at 5,782.56, on Monday.

Despite the market's strong effort on Monday the volume remained relatively light. In fact, it dropped almost 500,000,000 shares from Friday's action, James Hyerczyk, analyst at Autochartist, said.

Higher-highs on low volume are not a good sign ... Low volume and low volatility typically are not a good combination. This could be a sign that a top is near.

The FTSE volatility index <.VFTSE>, which falls as investors become more confident, is down 14.8 percent in 2012.

The FTSE 100 has rallied 7.3 percent since its December low, which has left shares close to overbought territory on the relative strength index at around 66 percent, where 70 percent indicates share are overbought.

Investors were also spooked as Greek debt talks to avoid a chaotic default looked set to go to the wire, after euro zone finance ministers on Monday rejected an offer made by private bondholders to help restructure Greece's debts.

Although pause in the rally today looks more technical, the underlying sentiment towards Europe remains one of caution and that's putting a check on gains, although the market still expects some sort of deal to be struck, Jimmy Yates, head of equities at CMC Markets, said.

Highlighting investors' confidence that a deal would be done, the cost of insuring against a Greek default continued to fall.


Among the top fallers on Tuesday were those firms that have led the market higher recently, including banks <.FTNMX8350> such as Barclays down 2.6 percent.

Sentiment in the sector was dented as European peer Deutsche Bank was downgraded to neutral from overweight by JPMorgan on valuation grounds, and the broader financials were knocked by a downbeat note by RBS.

Fund firm Ashmore shed 3.3 percent as RBS cut its rating on the company to hold from buy, while independent financial adviser Hargreaves Lansdown was down 2.3 percent as the broker downgraded its recommendation to sell from hold.

We see regulation as the key theme for the sector, with bank funding issues, the implementation of the RDR (Retail Distribution Review) and ongoing cyclical headwinds all weighing on fund flows over the next 12 months, RBS said in a note.

Fund manager Man Group fell 1.9 percent.

Miners <.FTNMX1770> fell too as investors banked some profits on the sector which has rallied 14 percent in the last month, compared with a 5 percent rise on the FTSE 100.

Vedanta shed 2.1 percent as HSBC cut its target price on the miner to 1,320 pence from 2,110 pence.

On the upside, Weir Group rebounded 2.2 percent as Goldman Sachs repeated its buy rating on the maker of pumps and valves.

The broker said the 14 percent fall in Weir shares versus its sector on the back of falling gas prices had been exaggerated, and while Weir was likely to be volatile in the near-term, it saw a number of potentially positive catalysts.

As riskier stocks fell, defensives were on the rise with utilities International Power and SSE up 1.3 and 1.0 percent, respectively.

On the domestic data front, the latest borrowing figures for the British government will be released at 0930 GMT.

December's PSNB expected at 12.20 billion pounds, down from 15.23 billion pounds the month before. Excluding financial intervention, December's PSNB is forecast at 14.90 billion pounds, down from 18.09 billion pounds in November.

(Writing by David Brett, Editing by Helen Massy-Beresford)