UK FTSE hits five-month low on Greek impasse, U.S. rate fears

* FTSE 100 down 0.6 pct

* Greek talks at impasse, U.S. rate hike fears hurt sentiment

* Royal Mail (LSE: RMG.L - news) hit by prospect of UK rules review

* APR Energy (Other OTC: APRYF - news) down nearly 30 pct after profit warning

By Francesco Canepa

LONDON, June 16 (Reuters) - Britain's main share index dropped to a five-month low on Tuesday, with investors unnerved by a hardening of stances in Greek debt talks and worries that the Federal Reserve may signal it will raise interest rates soon.

Postal services provider Royal Mail was among the shares leading the decline, down 2 percent. A British watchdog agency said it would review the regulation of the former state-owned firm after the withdrawal of its only competitor.

The FTSE 100 was down 0.6 percent at 6,671.46 points at 0802 GMT, after touching its lowest level since January at 6,652 points. The index is down 1.6 percent this year.

Appetite for shares was drying up as Greece and its creditors hardened their stances on Monday, after the collapse of talks aimed at preventing a default and possible euro exit. {ID:nL5N0Z11DG]

Also, the U.S. Federal Reserve was set to announce the outcome of its policy meeting after the European market closes. The market expects it to signal its first rate increase in nearly a decade will come in September.

Consequently, said Ian Williams, a strategist at Peel Hunt, he was starting to see signs that investors were reducing their exposure to equities, which have been the asset class of choice for many over the previous two years as bond yields evaporated.

"The bigger issue is how we respond to a Fed tightening because we have had this very extended period of free money," Williams said.

Among small caps, APR Energy shed nearly 30 percent after saying it expected its 2015 results to be significantly below market expectations, hurt by higher-than-anticipated costs of exiting from Libya and delayed contract negotiations. (Reporting By Francesco Canepa; Editing by Larry King)