The top share index was slightly lower by midday on Wednesday, in light trade, as weakness in banks and retailers outpaced gains in integrated oil stocks.

The blue-chip index <.FTSE> fell 5.04 points, or 0.1 percent to 5,694.87 by 11:42 a.m., with volume running at only 27 percent of its 90-day average.

As the FTSE 100 approached highs not seen since late October, investors consolidated gains in riskier banking and mining stocks and parked funds in safer havens.

UK-listed banks were the heaviest fallers as nervousness crept in after Italy's UniCredit heavily discounted a rights issue to raise capital to meet tougher European Banking Authority requirements.

It's all about sentiment and the news has given investors an excuse to bank recent gains, Jimmy Yates, head of equities at CMC Markets, said.

Gerard Lane, strategist at Shore Capital, said there were

fewer worries surrounding UK-listed Barclays , HSBC and Lloyds' need for recapitalisation, but a lot depended on the fate of European economies and their debt restructurings.

Royal Bank of Scotland was down 1.1 percent.

Retailers came under pressure after Next , down 3.5 percent, kicked off the Christmas reporting season with a whimper, prompting concerns over the potential for downgrades.

As a likely outperformer, the Next statement does not set a positive tone for competitor updates, Peel Hunt said.

Marks & Spencer shed 0.9 percent, while Kingfisher , owner of B&Q, was down 1.1 percent.

Satellite pay-TV broadcaster BSkyB shed 2.4 percent, with traders pointing to a report in the Daily Mail newspaper which said Apple could bid for rights to show football matches from the Premier League.

BSkyB holds most of the rights to broadcast live matches in the UK. ESPN holds the rest.

Interdealer broker ICAP lost its dividend attraction and clipped 0.15 points off London's blue-chip index.

Wall Street futures pointed to a flat start for U.S. equities on Wednesday, which also kept a lid on FTSE 100 gains, as investors watched for November U.S. factory orders and revised durable goods orders, both due for release at 3 p.m.

SURPRISE

With the FTSE 100 having jumped 2.3 percent on Tuesday after better than anticipated global manufacturing figures, there was more encouraging data out of the UK on Wednesday.

Growth in Britain's construction sector unexpectedly picked up speed in December, and British mortgage approvals rose in November to their highest in almost two years.

Capital goods firm Weir and outsourcer Serco , both of which can be traded as a proxy for the health of the economy, rose as much as 1.5 percent.

There was, however, a defensive feel to the FTSE 100 risers list, with utility Severn Trent and household goods firm Reckitt Benckiser each gaining 1.3 percent.

Integrated oils ploughed higher, supported by the price of oil which remained around recent highs of $102 a barrel, and as investors continued to like the defensive attractions of the sector -- reliable dividends, strong balance sheets -- given the tough global growth outlook.

Broker Davy said current consensus forecasts of double-digit profit growth for 2012 looked difficult to achieve, and careful stock picking in defensive sectors would likely be key to outperforming the market.

Oil major BP rose 1.2 percent as the stock continues its gradual rehabilitation after the Gulf of Mexico oil spill in April 2010.

BP's $20 billion (12.8 billion pound) oil spill fund has ended payments to eligible victims and the company has opened a new legal move in its battle to force contractor Halliburton to help pay the clean-up costs.

BG Group added 0.7 percent to 1,439 pence, with traders saying a close above 1,447 could see the stock move as high as 1,505.

(Editing by David Hulmes)