FTSE closes 0.6 pct lower

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By Harpreet Bhal

LONDON (Reuters) - The leading share index ended 0.6 percent lower on Tuesday, with sentiment dampened by data showing the United States economy grew at a slower pace than previously thought, pressuring banks and commodity stocks.

The FTSE index <.FTSE> ended 31.54 points lower at 5,323.96, reversing earlier gains, to mirror falls on Wall Street after third quarter U.S. economic growth was revised down to 2.8 percent from 3.5 percent.

Banks were the biggest drag on the index, with heavyweight HSBC , part-nationalised Royal Bank of Scotland , Standard Chartered and Barclays shedding 0.2 to 4 percent as investors shied away from risky positions.

"There has been some selling in financials after the GDP figures ... and people have been going into safe-haven stocks like utilities," said Sam Wright, equity trader at Spreadex.

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Bucking the trend, Lloyds Banking Group added 2.6 percent, one of the top gainers on the index after pricing its 13.5 billion pound rights issue at 37 pence, a 60 percent discount to Monday's closing price.

Jitters over the pace of recovery in the U.S. economy also put pressure on metals prices on demand worries, and dragged mining stocks lower. Antofagasta , Rio Tinto , Kazakhmys , Xstrata and Vedanta Resources lost 0.4 to 3 percent.

Xstrata marked its first entry into the iron ore sector by paying $50 million to study an exploration project in the Republic of Congo.

SLOW U.S. RECOVERY

In addition to the downward revision to U.S. GDP growth, other data released on Tuesday signalled a slow recovery in the world's largest economy.

The Standard and Poor's/Case Shiller home price index rose for a fifth straight month, but the rise was slower than expected. U.S. consumer confidence edged up in November after a drop in the previous month.

After the close of European markets, attention will turn to the minutes from the U.S. Federal Reserve's Nov 3-4 policy meeting, due at 7 p.m. BST.

Among gainers on the FTSE, defensive beverage companies Diageo and SABMiller added 0.2 and 1.1 percent respectively, as investors turned their attention to lower-risk plays.

Utilities also benefited from their safe-haven appeal, with Centrica , National Grid and Severn Trent up between 0.7 and 1 percent. United Utilities put on 1.7 percent ahead of its first-half results on Wednesday.

Power generation company International Power rose 1.3 percent as Evolution Securities repeated its "buy" rating, citing moves in Australia to improve coal plant compensation as positive for the stock.

Among other defensives, retailers Marks & Spencer , and Home Retail rose 1.9 and 0.6 percent respectively.

The FTSE has so far gained 54 percent since hitting a low in March, and is on track to post its best monthly gain since August. With the end of the year approaching, analysts expect trading in equity markets to be subdued.

"As we head to the end of the year, trading is likely to be scrappy as investors will want to book profits and will not want to be too exposed to anything," said Peter Dixon, economist at Commerzbank.

(Additional reporting by Simon Falush; editing by John Stonestreet)

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