Insurer RSA leads FTSE lower after profit warning

* FTSE 100 down 0.4 percent

* RSA knocked by profit warning

* Miners boosted by China HSBC/Markit services PMI

By Tricia Wright

LONDON, Nov 5 (Reuters) - Britain's top share index weakened on Tuesday, insurer RSA sinking on the back of a profit warning while banks also suffered sharp drops.

RSA shed 6.6 percent in brisk volume after saying that insured losses caused by recent severe weather in Europe and Canada were "materially above assumptions" and that full-year returns to shareholders were likely to suffer.

Trading volume in RSA stood at 383 percent of its 90-day daily average, well above the FTSE 100 on 78 percent.

The UK benchmark was down 24.96 points, or 0.4 percent, at 6,738.66 points by 1555 GMT, led down by banking stocks which knocked nearly 15 points off the index.

Europe's largest bank HSBC shed 0.8 percent and Barclays (LSE: BARC.L - news) fell 2.7 percent, with dealers citing continuing regulatory probes which are forcing affected firms to set aside ever growing pots of cash to settle cases.

On Monday, HSBC said it was trawling through sales of investments to more than 200,000 customers amid fears of another mis-selling scandal. Royal Bank of Scotland (LSE: RBS.L - news) slipped 1.9 percent and traders pointed to Exane BNP Paribas' downgrade of the UK lender as an additional drag on sentiment.

Miners helped limit the index's losses, up 1.5 percent, bolstered by a private survey showing the services industry in top metals consumer China picked up in October in further evidence its economy has stabilised.

"We like the energy and materials sectors in the UK - on a general improvement in the global economy, also relative valuations," said James Butterfill, equity strategist at Coutts.

"Analysts are just starting to upgrade their earnings forecasts (for the two sectors). While they're still net quite bearish, typically when they start to upgrade that's quite a good time to get in."

The oil & gas sector is the second cheapest STOXX Europe 600 sector, trading on a 12-month forward price/earnings ratio of 9.9 times, while the basic resources sector trades on 12.8 times, according to Thomson Reuters Datastream. The STOXX Europe 600 trades on 13.4 times.

Despite Tuesday's weakness, analysts remained bullish on the FTSE 100, which hit a five-month high at 6,819 last week and is up nearly 12 percent from June.

The third-quarter earnings season has helped underpin the equity market rally, with half of European companies to have reported so far having beaten or met earnings expectations, Thomson Reuters Starmine data shows.

"Given increasing corporate earnings and a strengthening global and domestic economic recovery it is likely (equities) from here will be broadly supported... we would expect the FTSE to continue higher for a number of months," said Richard Bonnor-Moris, head of multi-asset solutions at Newscape Capital Group.

(Additional reporting by David Brett; editing by Patrick Graham (AMEX: GHM - news) )