Rolls-Royce weighs on FTSE after five-day advance

By Kit Rees

LONDON (Reuters) - Britain's top share index ended slightly lower on Tuesday, pausing after a five-day winning streak as Rolls-Royce (RR.L) tumbled after reporting a record loss.

The blue chip FTSE 100 (.FTSE) index closed down 0.1 percent at 7,268.56 points, having hit its highest level since mid-January in the previous session.

Shares in engineering firm Rolls-Royce dropped 4 percent after the company announced a 4.6 billion pound loss, hit by a fine to settle bribery charges and by losses on its currency hedges.

The stock was the most actively traded on the FTSE 100. Fellow defence firm BAE Systems (BAES.L) also fell 1.7 percent.

Analysts cited concerns about Rolls-Royce's outlook as putting pressure on the shares.

"Some investors may also have a restive reaction to the rather dry and narrow outlook comments, projecting only 'modest performance improvements' and similar free cash-flow generation as in 2016," said Ken Odeluga, market analyst at City Index.

Improved earnings, however, buoyed shares in travel firm TUI (TUIT.L), which jumped 5.3 percent.

TUI reported a narrower loss for the first quarter of 66.7 million euros, a 17 percent improvement on last year, and said it aimed to start offering holidays to customers from countries such as China, India, Spain and Italy.

Analysts cited the sale of its specialist holiday arm Travelopia to KKR (KKR.N) in a $407 million deal as a further boost to its shares.

"While we have reservations about the outlook for source markets, we are attracted to the increased diversification and the steps TUI that has taken to drive growth elsewhere in the business," analysts at Berenberg said in a note.

Banks rose, led by Royal Bank of Scotland (RBS.L) and HSBC (HSBA.L), as the sector was supported after Federal Reserve Chair Janet Yellen struck a hawkish tone on the timing of an interest rate hike. Higher rates are seen as helping banks boost their margins.

Among smaller companies, a solid set of results boosted shares in Acacia Mining (ACAA.L), which rallied 8 percent and was the biggest mid-cap gainer (.FTMC).

The gold miner said production in 2017 would rise 40 percent, and said it would more than double its dividend.

(Additional reporting by Danilo Masoni; Editing by Mark Trevelyan and David Holmes)