sterling falls on surprisingly weak UK production data

LONDON Oct 6 (Reuters) - Sterling hit a one-week low against the euro and UK gilt futures hit a contract high on Tuesday after an unexpected fall in UK manufacturing output raised doubts about the economy's recovery prospects.

British manufacturing output fell 1.9 percent on the month in August -- the steepest fall since January -- and compared with July's downwardly revised rise of 0.7 percent. That confounded analysts' expectations for an increase of 0.3 percent. [ID:nONS004531]

The euro EURGBP=D4 rose as high as 92.34 pence on the data, its highest level since Sept. 28. It rose from arond 91.95 pence before the figures were released, and the pair traded roughly half a percent higher on the day.

Sterling GBP=D4 fell more than half a U.S. cent on the data, relinquishing earlier gains to trade flat on the day around $1.5940.

The December gilt future FLGZ9 turned positive and hit a contract high of 120.45, up 8 ticks on the day and rising from levels of 120.34 before the data.

Britain's FTSE 100 .FTSE slipped around 5 points after the data, but remained 0.7 percent higher on the day at 5,060.97.

(Reporting by London Forex Team)