British blue chips swung to a closing loss on Thursday and erased earlier gains, dragged lower by a drop in mobile phone giant Vodafone and losses on Wall Street.

Mining and metals stocks, which topped the leaderboard throughout the session, rose along with commodity prices as copper and gold hit new highs. Kazakhmys and Xstrata were both up over 3 percent.

But three-quarters of the market headed lower, pushing the FTSE 100 index down 41.4 points to 6,042 by the close -- more than 70 points below its session peak.

The turnaround tracked a drop in New York, where the Dow Jones industrial average was down nearly 1 percent on renewed concerns about the impact of higher energy costs on consumer spending and corporate profits.

I believe it's a question of time before companies begin to agonise over these increased costs, said Edward Menashy, a strategist and economist at brokerage Charles Stanley. He added, however, that low valuations would help prevent a sharp negative reaction for UK stocks.

If one looks at the price earnings ratio for the FTSE at the moment, it's about 13, and so consequently there's a lot of leeway for equities. The alternative is where are you going to put the money? The yields on bonds, despite the recent rise, are still very low indeed.

VODAFONE WEIGHS

Mobile phone giant Vodafone accounted for a large portion of the market's drop, falling over 2 percent as concerns surfaced following results from German operator Deutsche Telecom. Analysts focused on weak UK margins from Deutsche Telekom and fierce price wars in Germany.

Asia-focused bank Standard Chartered managed to stay in positive territory as dealers cited renewed takeover talk. The bank declined to comment, and traders were unable to provide further details, although U.S. banks and Singapore's Temasek have previously been touted as possible buyers.

This is a big speculation stock, said one trader.

Back on the downside, Marks & Spencer lost 3.3 percent as JPMorgan Cazenove placed 40 million shares in the clothing and food retailer, dealers said.

International Power also featured among the heaviest blue-chip fallers, despite reporting first-quarter profits up 80 percent. The shares settled down 3 percent.

We are not surprised that there has been some profit-taking. We reiterate that the expectations for IP are very high but also that these results have lived up to these expectations, Williams de Broe utilities analyst Angelos Anastasiou said.

On the mid-cap index, shopping catalogue firm Findel shed nearly 5 percent as Seymour Pierce cut its investment rating following results that failed to match the brokerage's forecasts.

(Additional reporting by Louise Heavens, Matt Falloon)

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