French downgrade halts UK share surge
* FTSE down 0.2 percent
* Moody's French downgrade helps cap upside
* Banks, commodity stocks fall as investors consolidate
* Intercontinental rises after Barclays upgrade
By David Brett
LONDON, Nov 20 (Reuters) - Britain's top share index slipped slightly in thin trade on Tuesday as Moody's downgrade of France pushed some investors to take profit after the market's biggest one-day rise this year.
By 0847 GMT, Britain's FTSE 100 was down 0.2 percent, or 12.23 points, at 5,725.43, having rallied 2.4 percent on Monday on optimism U.S. lawmakers would soon come to some agreement over a fiscal compromise.
The rally hauled the blue-chip index back within its recent tight trading range but technical analysts said the index might find resistance around the 5,750 level before making further progress.
"This (resistance) could see a further return to the 5,600 level where it would coincide with long-term (multi-year) rising support and provide a renewed platform for recovery," Mike van Dulken, Head of Research at Accendo Markets, said.
Despite optimism rising over an agreement in the United States, a deal has yet to be struck, while Moody's removing France's coveted AAA credit rating, although expected, was a sober reminder of the hurdles facing the outlook and stability for the global economy.
"What is very clear is that we are in for a prolonged period of slow growth," Robert Farago, head of asset allocation at Schroders, said.
"What is less clear is whether we'll have a downturn triggered by the U.S. fiscal cliff or the euro zone debt crisis," he said.
Outlook worries have put pressure on corporate earnings, leading analysts to cut earnings forecasts for the fourth-quarter by around 3 percent.
That uncertainty has kept the FTSE 100 pegged mainly in a tight range between 5,700 and 5,900 for around 10 weeks.
Riskier assets, which helped to propel the market higher in the previous session, were Tuesday's biggest fallers with banking and commodity-related sectors weighing on the index.
"There is not much fresh macro or company news out there, so we are all waiting for the U.S. open later on for a bit of direction," a London-based trader said.
Illustrating investor caution early on Tuesday, the FTSE 100 had traded just 6 percent of its 90-day average daily volume in what is traditionally one of the busiest periods of the day.
The top gainer on the index was Intercontinental Hotels , up 2.1 percent, as traders latched onto Barclays upgrade of the hotelier to "overweight" from "equalweight".
Barclays said in a note it expected Intercontinental to sell some $800 million in assets with proceeds earmarked for returns to shareholders in 2013.
(Written by David Brett; editing by Stephen Nisbet)
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