FTSE marginally lower ahead of U.S. data

* FTSE off 0.1 pct in choppy trade

* Miners rise with commodity prices

* Arm falls after JP Morgan comment

By David Brett

LONDON, Sept 2 (Reuters) - Britain's top share index was slightly lower around midday on Thursday, after sharp gains in the previous session, with investors holding back until economic data from the United States later in the day.

By 1030 GMT in a choppy morning's trade, the FTSE 100 <.FTSE> was down 5.57 points, or 0.1 percent, at 5,360.57, having closed up 2.7 percent at 5,366.41 on Wednesday, its strongest daily performance in almost a month, buoyed by strong economic figures and M&A speculation.

"Low volumes and the fact that people are satisfied that in isolation equities represent some value (are keeping the bears at bay)," David Buik, senior partner at BGC Partners said.

"Seventy percent of the FTSE is an international market that (has) dollar or overseas-related earnings, therefore there is no need to be downbeat about them at this moment in time."

Investors looked ahead to U.S. weekly jobless numbers and pending home sales later in the session for further indications on the strength of recovery in the world's biggest economy, ahead of the non-farm payrolls figures on Friday.

Miners <.FTNMX1770>, among the best performers on Wednesday after the bullish manufacturing data from China and the United States, rose again in tandem with metals prices.

Kazakhmys <KAZ.L> was the top riser in the sector up 1.9 percent.

However, Lonmin <LMI.L> and African Barrick Gold <ABGL.L> fell 1.4 and 2.5 percent, respectively, as Citigroup cut both their ratings to "hold" from "buy", arguing precious commodities are set for a subdued second half of 2010.

Hochschild Mining <HOCM.L> shed 2.9 percent as Citigroup downgraded its recommendation on the mid cap miner to "sell" from "hold".

Banks <.FTNMX8350> were little changed ahead of a decision from the European Central Bank on interest rates at 1145 GMT; the bank is expected to keep rates at a record low of 1 percent.

M&A TALK PERSISTS

M&A talk continued to spark investor interest. Britain's biggest software company Autonomy <AUTN.L> topped the blue chip risers list, up 5 percent, with traders citing press reports that the software company could find itself at the centre of a takeover battle between Microsoft <MSTF.O> and Oracle <ORCL.O>.

Mid cap housebuilder Redrow <RDW.L> added 4.7 percent as speculators remained convinced that founder and chairman Steve Morgan, who owns 29.9 percent of the equity, will soon take the company back into private hands for 495 million pounds, or 160 pence a share, the Daily Mail market report said.

Defence contractor BAE Systems <BAES.L> climbed 2.9 percent after the firm received a $629 million contract to upgrade 1,700 Caiman MRAP vehicles. [ID:nWNAB2700]

On the downside, UK Chipmaker Arm Holdings <ARM.L> was the top faller on the FTSE 100, down 4 percent, with JPMorgan Cazenove arguing that U.S. peer Intel's <INTC.O> purchase of Infineon's <IFXGN.DE> wireless unit is neutral rather than positive for Arm.

Testing equipment firm Intertek Group <ITRK.L> dropped 0.6 percent, with traders citing a Morgan Stanley note in which the broker cut its rating to "underweight" from "equalweight".

Telecoms firm Cable & Wireless Worldwide <CWP.L> and British satellite business Inmarsat <ISA.L> fell 3 and 1.1 percent, respectively, paring previous session's gains, having been linked with M&A whispers on Wednesday.

"I think traders are going to want to hold off ahead of the Non Farm Payrolls on Friday and the Labor Day weekend in the U.S., making it difficult to build on yesterday's rally in the short term," David Morrison, market strategist at GFT Global said. (Editing by Will Waterman)