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FTSE 100 shrugs off Reckitt Benckiser blip

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* FTSE 100 up 0.4 pct

* Reckitt dips after fall in Q3 sales

* Merlin extends losses as PT cuts roll in

* Flybe drops after profit warning

LONDON, Oct 18 (Reuters) - The UK's top share index held its ground on Wednesday as third quarter earnings trickled in, with shares in Reckitt Benckiser dipping after a disappointing update.

Britain's blue chip FTSE 100 index was up 0.4 percent at 7,541.98 points by 0907 GMT, helped by a weaker sterling following data showing UK wage growth edged above forecasts, bolstering expectations for a Bank of England rate hike.

Shares in Reckitt Benckiser traded 0.3 percent lower after the consumer goods firm cut its full-year sales forecast, struggling with fallout from a cyber attack, a failed product launch and a safety scandal in South Korea.

Reckitt also said it will split into two business units.

So far this year Reckitt's shares have gained around 2.5 percent, against a 5.5 percent rise for the FTSE 100.

"Of all the profits warnings we've seen of late, this is by far the best received perhaps because the Q3 performance is still actually fairly good and we don't see things getting markedly worse in Q4 for the full year," Mike van Dulken, head of research at Accendo Markets, said.

Shares in Merlin Entertainments were the biggest fallers, sliding a further 3.3 percent as brokers cut their target prices on the stock following the firm's profit warning in the previous session.

Grocer Sainsbury's saw its shares drop more than 1 percent after saying that it would cut 2,000 jobs in the UK, mainly in its payroll and human resources departments.

British financials added the most points to the index, with HSBC, Prudential and Legal & General all rising 0.5 to 1.2 percent.

Smaller UK firms saw some more dramatic share price moves. Shares in mid cap tech stock Softcat rose 5 percent after it reported a rise in full-year revenue, though Nostrum Oil & Gas dropped 3 percent after saying it expected to see a hit to production in the first half of 2018.

Airline Flybe plummeted 13.6 percent after issuing a profit warning, with higher maintenance costs weighing on performance.

"The worry is that (Flybe's) cost base isnt strong enough to weather the headwinds facing the sector," Neil Wilson, senior market analyst at ETX Capital, said.

"Many small and mid-sized carriers are limping on thanks to cheap oil but further consolidation looks inevitable as capacity growth shrinks margins at the less competitive carriers," Wilson added.

(Reporting by Kit Rees; Editing by Janet Lawrence)