Tobacco stocks drag Britain's FTSE lower

* Canadian ruling hits BAT

* Wolseley (LSE: WOS.L - news) gains as revenues rise

* Greece keeps market on edge (Recasts, updates prices)

By Liisa Tuhkanen and Alistair Smout

LONDON, June 2 (Reuters) - Britain's top share index dropped on Tuesday, weighed down by a drop in tobacco stocks, although strong gains in plumbing supplies group Wolseley helped to limit the losses.

Shares (Berlin: DI6.BE - news) in British American Tobacco (LSE: BATS.L - news) fell 2.3 percent, making it the worst-performing FTSE 100 stock. A Canadian court awarded more than C$15 billion in damages to smokers in class action cases on Monday and a BAT subsidiary was among three companies that said they would appeal.

Sector peer Imperial Tobacco (LSE: IMT.L - news) dropped 2.1 percent, with traders citing readacross from the Canadian ruling. The two stocks trimmed almost 9 points off the blue-chip index.

The FTSE 100 was down 56.25 points, or 0.8 percent, at 6,897.33 points by 0847 GMT after falling 0.4 percent on Monday.

The index is up about 5 percent this year, but has traded in a tight, 350-point range since the beginning of February.

On the upside, Wolseley was the biggest gainer, rising 2.9 percent after posting a 12.4-percent rise in quarterly revenue.

"We are pleased to see the continuation of strong revenue growth in like-for-like trends," Guardian Stockbrokers' director of trading, Atif Latif, said.

"Overall we continue to remain bullish on the outlook given the margins trend continuing to remain resilient."

Wolseley was one of only six stocks in positive territory as the index turned lower, after trading flat early in the session.

Traders said that persistent uncertainty about the situation in cash-strapped Greece was worrying investors.

The heads of Germany, France and Greece's international creditor institutions agreed late on Monday to work with "real intensity" in the coming days as they try to clinch a deal in debt negotiations with Athens.

"Europe is still a big unknown. It's keeping the markets on edge, and we're playing a range, because no-one wants to commit their money long term when no one knows what the outcome over Greece is," ETX Capital sales trader, Mark Priest, said. (Editing by Louise Ireland)