Weak utility stocks take the spark out of UK's FTSE

* FTSE down around 1 pct

* UK utility stocks hit by drop in U.S utilities on Friday

* Rise in gold price lifts Fresnillo (Other OTC: FNLPF - news) and Randgold

* FTSE up around 3 pct so far in 2015

By Sudip Kar-Gupta

LONDON, Feb 9 (Reuters) - Britain's top equity index retreated on Monday, as a fall in major utility stocks weighed on the market.

The blue-chip FTSE 100 index fell 0.9 percent to 6,793.17 points in early session trading, with United Utilities (LSE: UU.L - news) and Severn Trent (Other OTC: STRNY - news) down 3.7 percent and 2.8 percent respectively - the worst FTSE stocks in percentage terms.

Traders said the fall in UK utility stocks was a result of a drop in the shares of their U.S. rivals on Wall Street on Friday, when the S&P 500 index of utilities had its biggest daily percentage drop since August 2011.

U.S utility stocks were hit after U.S. government debt yields rose following strong U.S. jobs data that supported expectations of a rise in U.S. interest rates by mid-year.

Utility companies tend to have large amounts of debt in order to operate their networks, and so any rise in interest rates would lead to higher borrowing costs for them.

"The rise in the bond yields and the weakness in the U.S. sector is hurting the UK utilities," said Securequity sales trader Jawaid Afsar.

Gold mining shares Fresnillo and Randgold outperformed the broader market pullback to rise by 1.8 percent and 1 percent respectively. Both stocks were lifted by a rise in the price of gold, whose safe haven appeal was boosted following weak Chinese data over the weekend.

Randgold also softened the blow of reporting lower profits on Monday by lifting its dividend.

The FTSE 100 reached a peak last year of 6,904.86 points, its highest since early 2000, although it lost ground at the end of 2014.

The index is up around 3 percent so far in 2015, but Horizon Stockbroking director Kyri Kangellaris was reluctant to buy into the FTSE for now, due to ongoing worries over Greece's economy and concerns over a possible slowdown in China.

"I'd rather be a seller at these levels than a buyer," he said. (Editing by Tom Heneghan)