FTSE closes off highs as utilities shares fall

By Atul Prakash and Kit Rees

LONDON (Reuters) - Britain's top share index closed higher on Monday following a rally in banking and mining stocks, although a slump in utilities kept a lid on broader market gains.

The blue-chip FTSE 100 index (.FTSE) closed up 0.34 percent at 6,753.18 points after earlier rising as high as 6,814.19.

Utilities stocks, seen as bond-proxies, were the worst hit by higher bond yields prompted by the risk of faster inflation and wider budget deficits if president-elect Donald Trump pursues a U.S. infrastructure spending spree.

"Selling pressure in bonds will persist following Trump's victory and his pledge to spend heavily on infrastructure projects," Secureequity senior trader Jawaid Afsar said. "It will continue to prompt a rotation out of defensives into financials and miners for some time."

Severn Trent (SVT.L) fell 3.8 percent, the worst performer in the FTSE 100 index, while shares in SSE (SSE.L), United Utilities (UU.L) and National Grid (NG.L) dropped by between 2.8 and 3.2 percent.

Russian gold and silver miner Polymetal (POLYP.L) fell 4.9 percent following a drop in gold prices. [GOL/]

Banks were in demand on hopes of a relatively lighter regulation in the United States and expectations that a rise in inflation could prompt the U.S. Federal Reserve to be aggressive in raising interest rates.

The UK banking index rose 2.7 percent, helped by a 2.4 to 5.2 percent rise in shares of Barclays (BARC.L), Royal Bank of Scotland (RBS.L) and HSBC (HSBA.L).

Miners were also in demand on expectations that Trump's plans to spend $1 trillion in infrastructure projects over a decade could boost demand for metals.

The UK mining index was up 1.6 percent as shares in BHP Billiton (BLT.L), Rio Tinto (RIO.L) and Anglo American (AAL.L) rose 2.3 to 2.8 percent.

Sharp moves in some stocks also supported the market.

Housebuilder Taylor Wimpey (TW.L) climbed 3 percent after saying it expected an increase in full-year operating profit margin, adding that trading had remained resilient following Britain's vote to leave the European Union.

"Taylor Wimpey's plans for 2016 have not been derailed by this year's political events and the forward orderbook suggests that profits will grow further in 2017," analysts at Jefferies said in a note, adding that Taylor Wimpey was their top pick among the housebuilders they covered.

Support services firm DCC (DCC.L) rose 2.8 percent after saying it expected full-year profit to come in ahead of expectations.

Beyond the blue-chips, Greencore Group (GNC.L) rose 9.5 percent after saying that it planned to buy U.S. convenience food manufacturer Peacock Foods for $747.5 million in a bid to transform its U.S. business.

(Editing by Andrew Heavens and Alexander Smith)