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* FTSE 100 down 0.7 pct
* Merger chatter livens up UK banks
* M&S rises after full-year update
* Commodities a drag
By Kit Rees
LONDON, May 23 (Reuters) - The UK's top share index nudgedlower on Wednesday, weighed down by declines amongcommodity-related stocks, though well-received results from M&Sand deal chatter among British banks kept trading lively.
The blue chip FTSE 100 index was down 0.7 percent at7,823.71 points by 0912 GMT, edging down from the previoussession's record high.
Deal-making talk among banks spurred shares in StandardChartered 1.5 percent higher, the second-biggest FTSEgainer, following a media report that peer Barclays wassounding out possible mergers with rival banks.
Shares in Barclays reversed their slight gains from earlierto trade 0.6 percent lower. Sources told Reuters that Barclayshas no plans for a tie-up with rival banks.
"If Barclays has genuinely been looking into this ... itmakes sense for it to do it as a protective measure given thatit is facing activist demands and we've seen them prove quitesuccessful elsewhere," Mike van Dulken, head of research atAccendo Markets, said.
"But it would be a huge undertaking."
M&A has been a prominent theme among UK stocks this year asthe pound remains at subdued levels, with recent moves beingCYBG's takeover bid for Virgin Money, Takeda'sacquisition of Shire and Sainsbury's deal withAsda.
Marks & Spencer was the biggest gainer, up 3.5percent after the retailer gave a full-year update.
While it reported a second straight decline in annual profitand saw like-for-like clothing and home sales fall in the fourthquarter, investors were positive that the retailer had kept itsoutlook and not cut its dividend. Marks & Spencer is undertakinga programme of store closures to help revitalise the business.
Ameet Patel, senior analyst for Northern Trust CapitalMarkets, said that M&S' results were solid and highlighted theconfident tone in the company's outlook commentary.
"There remains a considerable short base in (M&S) for theall the ‘obvious’ reasons to sell UK retail, which brings withit the potential for squeezes on lack of bad news or even shadesof positive news," added Patel.
However, falls among heavyweight miners and oil stocks, inparticular, dragged the FTSE lower. Energy stocks took around 30points off the index as shares in Royal Dutch Shellfell 2.4 percent and BP declined 2 percent as oil pricesretreated on the possibility of higher OPEC output weighing onthe market.
A rise in Brent Crude to $80 per barrel this yearhas been a big help for both oil majors, with BP up more than 10percent and Royal Dutch Shell up 7.3 percent year to date.
Elsewhere British mid caps, which have also tradedat record highs, retreated 0.4 percent. Shares in ITinfrastructure and service provider Softcat and Britvicwere notable performers, up 7.7 percent and 6.5 percentrespectively.
Softcat rose after a trading update saying that marketconditions and customer demand have both remained robust in thethird quarter, while higher demand for healthy drinks boostedBritvic's half-year revenue.(Reporting by Kit ReesEditing by Andrew Heavens)
