* FTSE gains for 10th session; longest winning run since '03
* Banking, energy shares advance; beverages shares down
* UK GDP falls more-than-expected in second quarter
By Harpreet Bhal
LONDON, July 24 (Reuters) - A rally in banking and energy shares helped UK equities to rise for a 10th straight session to a 6-1/2-month closing high on Friday, but gains were capped by weakness on Wall Street and poor UK economic data.
The FTSE 100 index ended up 0.4 percent, or 16.81 points, at 4,576.61, its highest closing level since January 7. The index has risen almost 11 percent over the past two weeks on reassuring U.S. corporate earnings results.
It is up 32 percent since a trough in March, with Friday's gains being its longest positive run in five-and-a-half years.
The market shrugged off a larger-than-expected fall in second quarter UK gross domestic product (GDP), which contracted by 0.8 percent in the three months to June and by 5.6 percent on the year..
Mike Lenhoff, chief strategist at Brewin Dolphin Securities, said the market may be pausing for breath in the short term but could push higher in the long run as optimism grows on the prospect of a global economic recovery.
"The market is increasingly of the view that the recovery is in progress now. It is forgetting about the bad numbers that we saw today in UK GDP and looking ahead to the recovery and the improvement in earnings," Lenhoff said.
"(The market) is taking a short break from the fury that has pushed it ahead, but I doubt very much whether it is going to give up a lot of ground. If anything, it looks as if it wants to climb higher."
Banks were in demand, with Barclays, HSBC, Lloyds, Royal Bank of Scotland and Standard Chartered rising between 0.2 and 3.3 percent.
Energy majors were also up, with crude prices rising 0.4 percent to trade above $67 a barrel. BG Group and Royal Dutch Shell advanced 2 percent and 0.3 percent, respectively, while BP was almost flat.
DOWNBEAT DATA
However, FTSE's gains were capped by disappointing economic data. The Reuters/University of Michigan Survey of Consumers showed consumer sentiment waned in July to the lowest reading since April on growing pessimism on the economic outlook.
In the UK, the second quarter GDP contraction was the biggest annual decline on record. Some analysts said that the situation may start to pick up from here.
"Although these figures are slightly disappointing, the economy's rate of contraction is nevertheless easing and the British recession appears to be on the wane," said Tom Salmon, senior trader at ShortsandLongs.com.
Investors got some relief from data showing euro zone services and manufacturing sectors contracted much less sharply than expected in July
Beverage firms were the biggest drag on the index, with Diageo and SABMiller retreating 0.7 percent and 0.8 percent respectively.
Miners were also lower, with Anglo American, BHP Billiton, Eurasian Natural Resources and Kazakhmys falling 0.1 to 2.2 percent.
Food retailers extended losses as traders continued to take profits, following a spike in shares after Wm Morrison raised its full-year trading expectations on Tuesday. Wm Morrison and Tesco lost 0.2 to 0.4 percent.
Vodafone gained 2.9 percent after Europe's largest telecoms firm by revenue reported a slight decline in organic sales that was in line with muted market expectations.
Pennon Group was the index's biggest faller, down 4.9 percent, after the water utilities company was downgraded by HSBC to "neutral" from "overweight" following OFWAT's order on Thursday for water companies to cut bills.
On the political front, the opposition Conservatives captured a parliamentary seat from ruling Labour with a large majority of the votes, a repeat of which would give them a landslide in a national election, due within a year. (Reporting by Harpreet Bhal; editing Karen Foster)