Britain's FTSE falters as easyJet slumps after profit warning

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* FTSE 100 closes down 0.5 pct, just below 7,000 points

* EasyJet falls after profit warning

* FTSE 100 up 12 pct in 2016, near record highs

By Sudip Kar-Gupta

LONDON, Oct 6 (Reuters) - Britain's top shares index fell onThursday, although it remained near record highs, with budgetairline easyJet sliding lower after issuing a profitwarning.

The blue-chip FTSE 100 index closed down 0.5 percentat 6,999.96 points - still near its record intraday high of7,122.74 points reached in April 2015.

EasyJet fell 6.9 percent after the company warned its profitwould fall by more than 25 percent this year, saying securityissues had dampened demand while low fuel prices meant there wasmore competition in the European short-haul market.

"We cut 2017 estimated pre-tax profit by 11 percent to 405million pounds ($512.20 million) as pricing continues tosuffer," said Credit Suisse analyst Neil Glynn, in a note oneasyJet. Glynn kept a "neutral" rating on easyJet shares.

The FTSE 100 rose to a 17-month high earlier this week andis up by 12 percent so far in 2016.

The Bank of England's decision in August to cut interestrates to record lows of 0.25 percent has propped up the FTSE 100and enabled it to recover from an initial slump in late Juneafter Britain's shock "Brexit" vote to quit the European Union.

Rock-bottom rates have hit returns on bonds and cash,driving investors to the better returns available from stocks.

The FTSE 100's international companies have also benefitedfrom a fall in sterling this week. Many of these companies earnmuch of their revenues in U.S. dollars and therefore get acurrency-related accounting lift as those dollars are convertedback to pounds.

However, the slump in sterling has also impacted the U.S.dollar value of FTSE 100 stocks, a potential negative foroverseas investors for whom the dollar is their benchmarkcurrency reference.

Roderic Owen-Thomas, director at London-based firm MayfairCapital Limited, expected the FTSE 100 to make little progressfor the rest of 2016, given underlying concerns over Brexit.

"We feel that most of the upside is complete for this year,"he said.

($1 = 0.7907 pounds) (Additional reporting by Atul Prakash; Editing by JanetLawrence)