* FTSE 100 off 0.3 percent
* Banks weaken after HSBC trading update
* Miners firm as soft dollar helps revive metals prices
By Tricia Wright
LONDON, May 9 (Reuters) - Britain's top share index fell on Monday, as weakness from banks after a trading update from HSBC offset rises in the mining sector, with some observers upbeat about the equity market's short-term prospects.
By 0844 GMT, the FTSE 100 was off 17.23 points, or 0.3 percent, at 5,959.54, after it closed 1.0 percent higher at 5,976.77 on Friday, buoyed by an unexpectedly strong U.S. jobs report.
Banks fell, as sentiment surrounding the sector was soured after HSBC said profits fell 14 percent from a year ago, with a jump in costs offsetting a fall in bad debts at Europe's biggest bank.
HSBC also said it would take a $440 million provision to compensate UK customers who were wrongly sold payment protection insurance after banks scrapped a collective legal fight on the issue.
Barclays shed 1.3 percent after it said it was to take a 1 billion pound ($1.64 billion) provision on the insurance mis-selling.
Meanwhile rumours that debt-stricken Greece could leave the euro zone -- talk denied on Saturday by Greek Prime Minister George Papandreou -- did the rounds, but investors took these largely in their stride.
"It's not as bad as the headlines are making out this morning," Angus Campbell, head of sales at Capital Spreads, said.
"I think the market feels that the allegations this time round probably are a little bit unfounded, and Greece potentially can muddle through," he said.
CAUTIOUS OPTIMISM
Technical analysis for the FTSE 100 was cautiously optimistic.
"Friday's trading action suggests the FTSE 100 may be poised for a near-term rally to 5,987.65 to 6,015.04," James Hyerczyk, analyst at Autochartist, said.
However, he added: "A retracement and subsequent failure in this zone will form a secondary lower-top, signalling the start of a possible sizeable correction."
Gains were seen from the miners, as commodities bounced back on Monday from last week's big drop, as a softer dollar and the upbeat U.S. employment data helped attract back shaken investors.
Lonmin was among the best risers on Monday, up 1.5 percent after it said operating profit more than doubled to $144 million in the first half and confirmed sales guidance for 2011. Evolution Securities lifted its rating on the shares to "add".
Inmarsat was the top FTSE 100 performer, up 3.6 percent, after the satellite operator reported a 23 percent rise in first-quarter earnings, which while broadly in line with expectations prompted Investec to put its price target and "hold" rating under review after recent share price weakness.
Centrica, meanwhile, was the biggest faller, off 3 percent at a nine-month low after the utility warned that rising taxes on North Sea oil and gas production would erode profit growth this year and cause it to scale back investments.
UK real estate investment firms Land Securities and British Land fell by up to 1.5 percent, as UBS downgraded its rating on the pair to "neutral" from "buy" on valuation grounds, in a note on London-focused real estate firms.
In economics news, British house prices suffered their biggest annual fall in 1-1/2 years in April as worries about the economic outlook deterred buyers, mortgage lender Halifax said. (Editing by Greg Mahlich)