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* FTSE 100 down 0.2 pct
* Banks, miners on the backfoot
* Price target cut weighs on Mediclinic
* Imagination Tech rockets after sale to Canyon Bridge
LONDON, Sept 25 (Reuters) - The UK's top share index retreated on Monday, pulling away from a one-week high as losses among heavyweight financials and commodities-linked sectors weighed, though small cap Imagination Tech soared after a buyout fund agreed to buy the chip designer.
The blue chip FTSE 100 index fell 0.2 percent to 7,298.30 points by 0849 GMT, underperforming a slightly positive European market following the result of the German general election.
While Chancellor Angela Merkel won a fourth term in office, the result pointed to a potentially fragile coalition.
Falls among British financials such as HSBC, Barclays and Lloyds took the most points off the index as investors scaled back their exposure to risky assets.
Cyclical mining stocks also pulled back, with Rio Tinto , Anglo American and BHP Billiton each slipping around 0.7 percent due to a weaker copper price, while a dip in oil prices also dampened shares in heavyweights Royal Dutch Shell and BP.
Recent strength in sterling and a more hawkish tone from the Bank of England have put pressure on UK equities, as the more internationally-exposed blue chips had benefited from an accounting boost thanks to a plunge in the pound in the immediate aftermath of last year's Brexit vote.
"We are underweight UK equities against European equities at the moment which is largely due to what we are seeing (as) a convergence in earnings growth," Maximilian Kunkel, Chief Investment Officer for Germany, UBS Wealth Management, said.
"We've recently seen very, very strong earnings growth in the UK largely helped by the weakness of the pound, and relatively strong local growth also we think that that is going to revert," Kunkel added.
Among individual stock moves, a price target cut from Jefferies weighed on shares in Mediclinic, which fell around 3 percent, with analysts saying that they expected Mediclinic's upcoming update to disappoint the market.
Moves were more pronounced among smaller UK firms, with shares in mid cap Tullow Oil jumping 6.6 percent after the oil producer said that expected to resume drilling at its TEN fields following an international ruling on an ocean boundary between Ghana and Ivory Coast.
Small-cap Imagination Technologies was on track for its best day since June 2009, shooting 32 percent higher after Canyon Bridge Capital Partners said that it would buy the British firm.
Imagination Technologies saw its shares slump more than 60 percent earlier this year after it was ditched by Apple , its biggest customer.
"The bid price of 182p looks a good outcome considering the underlying business is structurally unprofitable without Apple royalties," analysts at Investec said in a note.
(Reporting by Kit Rees, editing by Louise Heavens)