Smith & Nephew, financials knock FTSE off 3-month high

* FTSE 100 down 0.5 pct at close

* Smith & Nephew (Frankfurt: 502816 - news) falls 7 pct after results

* Trade war worries weigh on global markets (Recasts, updates prices at close)

By Helen Reid

LONDON, May 3 (Reuters) - Britain's top share index slipped on Thursday as a tumble in Smith & Nephew's shares and weakness across financials and health stocks dragged the FTSE 100 off a three-month high.

Despite a firmer start to trading and a weaker pound, the blue chip FTSE 100 turned lower and ended the session down 0.54 percent at 7,502.69 points, only slightly outperforming a negative European market.

Results dominated trading with sharp falls for some stocks, but investors remained positive on the overall picture for the UK earnings season.

Shares (Berlin: DI6.BE - news) in Smith & Nephew had their worst performance in close to 10 years, down 7 percent after Europe's biggest artificial hip and knee maker downgraded its revenue and profit forecasts following a weak first quarter.

Go Ahead Group tumbled 11.2 percent after Deutsche Bank downgraded the stock to 'hold' from 'buy', saying that in the absence of future rail franchise wins it is no longer clear the shares are significantly undervalued.

Glencore (Frankfurt: 8GC.F - news) shares climbed 0.4 percent after the commodities trader and miner said it expected 2018 earnings from its trading division to be at the top end of its previously forecast range.

Despite the negative mood on the day, Britain's leading stock index has enjoyed a rapid revival in recent weeks. It is up a hefty 9 percent since it hit a 15-month low as recently as March 26.

"I would not be surprised if we continue to see very strong UK equities numbers and a really quite material re-rating," said Guy Monson, chief investment officer at Sarasin & Partners, adding that if Brexit talks result in a settlement there could be a flight back into UK equities.

"We have been tactically adding on dark days," he added, saying he was keeping a UK focus "for a real backing of the underdog."

Inbound M&A interest in British assets continued apace with French property group Fonciere des Regions (LSE: 0J6V.L - news) buying 14 upmarket hotels in Britain from Starwood Capital for 858 million pounds ($1.2 billion).

The deal would also see InterContinental Hotels Group sign long-term leases for 13 of those 14 hotels and subsequently rebranding and running them.

"We have seen absolutely record levels of M&A," said Sarasin's Monson.

"The deal market began the year dotted with a few intra-UK announcements, but has since seen a flurry of large inbound acquisition attempts," said Liberum strategists.

"These stocks have offered growing revenue and international exposure at a depressed valuation."

(Reporting by Helen Reid Editing by Keith Weir and Hugh Lawson)