FTSE flat by midday; miners offset weak financials

* FTSE 100 flat by midday * Lonmin jumps after rival Xstrata launches bid * Old Mutual falls after U.S. disappointment By Dominic Lau

LONDON, Aug 6 (Reuters) - Britain's leading share index was flat by midday on Wednesday as Xstrata's (XTA.L: Quote, Profile, Research) $10 billion bid for rival Lonmin (LMI.L: Quote, Profile, Research) lifted miners, while Old Mutual (OML.L: Quote, Profile, Research) led insurers lower after first-half earnings.

By 1027 GMT, the FTSE 100 .FTSE was down 1.6 points, or 0.02 percent, at 5,452.9, after rallying 2.5 percent on Tuesday. The UK benchmark is down 15 percent for the year.

"In the short term, investors will be concerned about the extent to which the economic slowdown will harm corporate profitability," said Henk Potts, equity strategist at Barclays Stockbrokers. "Investors realise that some sectors have been aggressively oversold and that creates opportunity."

"From a corporate perspective, expectations of organic growth will be harder to find and therefore, increasingly companies will be looking to merger and acquisition activity to try to replace that," he said, adding that valuations were low.

Lonmin surged 47 percent after Xstrata launched a takeover bid for the world's third-biggest platinum producer to further diversify its business from industrial metals such as copper.

South Africa-focused Lonmin, however, rejected the bid.

Xstrata advanced 1.8 percent, while BHP Billiton (BLT.L: Quote, Profile, Research), Rio Tinto (RIO.L: Quote, Profile, Research), Anglo American (AAL.L: Quote, Profile, Research), Antofagasta (ANTO.L: Quote, Profile, Research) and Vedanta Resources (VED.L: Quote, Profile, Research) strengthened 2.3 to 4.5 percent.

Eurasian Natural Resources (ENRC.L: Quote, Profile, Research) added 3.4 percent after the Kazakh miner said its second-quarter production volumes rose compared with the same time last year.  Continued...