* FTSE 100 up 0.2%, FTSE 250 up 0.3%
* Banks top boost to main index
* Lufthansa's profit alert hurts airlines
* Babcock rises after confirming takeover bid
* Kier at record low after dividend cut (Adds company news items, analyst comments, updates share moves)
June 17 (Reuters) - London's main index inched higher on Monday in line with marginal gains across Europe, as rises in banks outweighed the impact of a profit alert from Germany's Lufthansa on airlines, while UK contractor Kier Group skidded to a life low.
The FTSE 100 index was up 0.2% by 0755 GMT, while the FTSE 250 midcap index gained 0.3%.
With all eyes on Wednesday's U.S. Federal Reserve policy decision, the banking index broke a four-day losing streak, led by Asia-exposed banks including HSBC and Prudential after Hong Kong's leader backed down over an extradition bill that has sparked mass protests.
"It's hard to recall a time we headed into an FOMC meeting with so much at stake and with so much uncertainty about what might be agreed," Markets.com analyst Neil Wilson said.
"Traders may start to show some nervousness ahead of the Fed meeting if they think it won't be accommodative as hoped."
The Fed, facing demands by President Donald Trump to cut interest rates, is expected to leave them unchanged but potentially lay the groundwork for a cut later this year as a prolonged trade war with China puts more strain on the U.S. economy.
The Bank of England also meets this week, with little expected but all eyes on central bank policymaking globally after two weeks in which hopes of policy easing have driven a stock market recovery from losses in May.
EasyJet and British Airways owner IAG gave up 4.3% and 3.3%, respectively, on the main bourse after Lufthansa cut its 2019 profit outlook due to competition from low-cost rivals in Europe.
Mid-cap component Wizz Air also dropped 4.4%.
Kier, whose shares have plunged this month due to rumours of a discounted sale of its unit and a profit warning, lost another 11.2% to a new all-time low after the builder slashed its dividend and announced 1,200 job cuts.
Another notable faller was Woodford Patient Capital Trust which fell 6% to a life low. The stock has been under pressure since Neil Woodford, among Britain's best-known fund managers, suspended one of his flagship funds due to increased redemption requests from investors.
Engineering services group Babcock added 4.1% after the company confirmed a media report that it had received and rejected a highly preliminary takeover bid from rival Serco earlier this year. (Reporting by Muvija M in Bengaluru; editing by Patrick Graham)
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