Britain's FTSE kicks off April with further falls

(ADVISORY- Reuters plans to replace intra-day European and UK stock market reports with a Live Markets blog on Eikon - see cpurl://apps.cp./cms/?pageId=livemarkets for site in development. See the bottom of the report for more details)

* FTSE 100 down 0.9 pct

* Energy shares weigh

* Royal Mail (LSE: RMG.L - news) falls the most on the index

* Home retail (Other OTC: HMRLF - news) back Sainsbury (Amsterdam: SJ6.AS - news) bid

By Alistair Smout

LONDON, April 1 (Reuters) - Britain's top share index fell on Friday, kicking off the second quarter of 2016 with another drop after mixed data in Asia and another drop in oil prices hit risk appetite.

Volumes were expected to be low on the last day of a holiday-shortened week, with some traders looking to the closely watched U.S (Other OTC: UBGXF - news) . non-farm payrolls jobs report at 1230 GMT to provide further direction for the market.

British shares followed Asia lower after a deeply disappointing survey of major manufacturers from the Bank of Japan which found sentiment at its lowest in nearly three years.

That detracted from better data out of China, and a drop in oil hit energy shares.

"Weak Japanese manufacturing data is likely taking its toll on risk appetite along with an oil price struggling around recent lows," said Mike van Dulken, head of research at Accendo Markets.

Britain's FTSE 100 was down 56.41 points, or 0.9 percent, at 6,118.49 at 0838 GMT, slightly outperforming most euro zone indexes.

The index fell 1.1 percent in the first quarter of March, and dropped for a second straight session.

Energy shares trimmed over 11 points off the index, with BP down 2.6 percent.

Traders cited a persistent oversupply of oil as pressuring prices, saying that hopes that oil producers might co-operate to restrict the flow of crude were dwindling. A strong dollar and mixed data were also weighing.

The FTSE 100 rose slightly off its lows after a survey showed that British manufacturing growth edged up in March from its weakest level in nearly three years.

Top faller was Royal Mail, down 3.7 percent. One trader cited an upcoming negotiation with unions over pay as weighing on the stock.

Sainsbury fell 2 percent after its offer to take over Home Retail was recommended by the target's directors.

The supermarket has been the favourite to buy Home Retail since rival Steinhoff pulled out two weeks ago. While investors have welcomed Home Retail's decision to sell Homebase separately, some said the deal still came with risks for Sainsbury.

"With (Other OTC: WWTH - news) the albatross of Homebase already sold off, Sainsbury can focus on cherry picking Home Retail for the best high street Argos stores to keep or to convert to its successful Sainsbury's local network," Jonathan Buxton, partner and head of consumer at Cavendish Corporate Finance, said in a note.

"There will remain, however, a real challenge in successfully integrating a sprawling non-food retailer imperilled by competition within its own sector."

ADVISORY- Reuters plans to replace intra-day European and UK stock market reports with a Live Markets blog on Eikon (see cpurl://apps.cp./cms/?pageId=livemarkets for site in development). In a real-time, multimedia format from 0600 London time through the 1630 closing bell, it will include the best of our market reporting, Stocks Buzz service, Eikon graphics, Reuters pictures, eye-catching research and market zeitgeist. Breaking news and dramatic market moves will continue to be alerted to all clients and we will continue to provide a short opening story and comprehensive closing reports.

If you have any thoughts, suggestions or feedback on this, please email mike.dolan@thomsonreuters.com.

Mike Dolan, Markets Editor EMEA. (Reporting by Alistair Smout; Editing by Alison Williams)