Britain's FTSE knocked back by Ukraine tensions

* FTSE 100 falls 0.9 pct

* Russia jet report spooks markets

* RBS and RSA fall as new CEOs undertake overhauls

* Capita among companies to report good results

* WPP hit on margin concerns

By Alistair Smout

LONDON, Feb 27 (Reuters) – Britain’s top share index fell on Monday, led lower by a drop in the futures market as investors were spooked by building tension over Ukraine, giving away a steady start following mixed corporate updates.

The FTSE 100 fell 59.95 points, or 0.9 percent to 6,739.20 points at 0959, having been steady an hour earlier, with traders citing a report from Interfax that Russian aircraft had been put on high-alert on the Ukrainian border as behind the move.

“There’s talk in the market of Russian jets being put on high-alert, and speculation that they’ll intervene in some way in the Ukrainian crisis,” Zeg Choudhry, head of equities trading at Northland Capital, said.

“People are selling the futures, and it’s more futures led than it is individual stock trading.”

Futures were down 1.1 percent, and volatility , a crude gauge of investor fear, rose 10.1 percent, its biggest one day rise in a month.

Royal Bank of Scotland led fallers, down 7.9 percent after its new CEO outlined plans for a large-scale overhaul after reporting an 8.2 billion pound ($ 13.64 billion) loss.

“We’re so far from being out of the other side of the tunnel with this stuff, it’s unbelievable. It’s another reminder that we’re six years on from the onset of this, and they’re still paying for it more than ever,” Toby Morris, senior sales trader at CMC Markets, said.

RESTRUCTURING

Troubled British insurer RSA also fell as it too seeks to move forward with a restructuring programme, with ex-RBS CEO Stephen Hester at the helm.

It dropped 3 percent after Hester launched a plan to boost capital by up to 1.6 billion pounds, half of which will be tapped from shareholders and the rest from disposals and money saved from a dividend cut.

However, some managed more encouraging earnings reports on Thursday, with gainers led by a 4.6 percent surge in Capita.

The British outsourcing group posted a 14 percent rise in annual profits on Thursday and said it was confident on 2014 after winning 588 million pounds ($ 978.3 million) worth of new contracts so far this year.

Other beneficiaries from better earnings were Reed Elsevier , up 1.2 percent after it said it was confident for 2014 following a rise in earnings, and Costa Coffee owner Whitbread , up 3.8 percent as it expects profit to come in at the top of forecasts.

In the earnings season thus far, 69 percent of FTSE 100 companies that have reported results have come in ahead or in line with expectations, Thomson Reuters StarMine data shows.

“As a whole, we haven’t had too many bad shocks with regards to results,” CMC’s Morris said. “However, it’s a little bit concerning how many firms are coming out and being a little bit tentative about 2014 … it puts a bit of a dampener on things.”

One such firm was the world’s largest advertiser WPP , down 4.5 percent despite reporting strong trading, with Liberum and Numis both raising concern over a hit to margins and lower margin guidance moving forward.

“Full-year results were below our expectations due to a margin miss … However, the main reason for the downgrade is that WPP has taken down its longer-term margin improvement targets,” Liberum said in a note, cutting the stock to “hold” from “buy”.

“While January has started well and the share buyback programme has increased, this does not offset the disappointing message on margin improvement.”