Britain's FTSE at 3-month lows as retailers retreat
* FTSE 100 index down 0.7 pct, hits lowest since July
* 7-day RSI turns oversold
* Retailers hurt by data, analyst comments
By Toni Vorobyova
LONDON, Oct 8 (Reuters) - Britain's top share index slipped to fresh three-month lows on Tuesday as retailers were hit by weak data and downbeat analyst comments and the fiscal deadlock in the United States kept broader sentiment subdued.
In stark contrast to the recent trickle of positive domestic data, British retail sales growth slowed for a second month in September, according to BRC numbers.
Analyst notes on the sector were also downbeat, with Deutsche Bank cutting its full year earnings forecast for Marks & Spencer by 2 percent while Bernstein downgraded the stock to 'underperform'.
Shares in M&S dropped 2.0 percent, the top blue-chip faller, while rival Next fell 1.6 percent and the FTSE 350 General Retail index lost 1.3 percent.
"The retailers are notably weak today after the BRC numbers. They are all quite close to (technical) support levels, but whether they actually hold those levels I am not sure - it certainly feels that path of least resistance is lower at the moment," said Zeg Choudhry, head of equities trading at Northland Capital Partners.
Britain's FTSE 100 was down 44.78 points, or 0.7 percent at 6,392.50, just above a session low of 6,383.18 points, which was its weakest since July.
Also among the top fallers were heavyweight miners like Rio Tinto and BHP Billiton, hit by slowing service sector growth in top metals consumer China.
Broader sentiment was also bruised by the continued U.S. political deadlock, with the second week of government shutdown raising concerns a compromise may not be reached before an Oct. 17 deadline for raising the country's debt ceiling.
Monday brought a glimmer of hope as President Barack Obama said he would accept a short-term hike in the U.S. borrowing authority, but still no deal emerged.
Britain's FTSE 100 - whose companies rely on the United States for nearly a quarter of their sales - has proved more vulnerable to the U.S. jitters than euro zone peers.
The weakness has seen the London index test technical support at the 200-day moving average in three of the past five sessions, and has pushed it into oversold territory on the seven-day relative strength indicator (RSI).
The number of companies trading above their 200-day moving average has fallen to 53 from 75 over three weeks, according to Datastream, but is still above its June trough of 47.
"We are OK on the breadth at the moment, there is enough strength within the market for it to turn round," said Bill Rook, technical analyst at Redmayne Bentley.
"I reckon there is scope for a major bounce from around these levels. I would like to see dip below 6,380 and then we need to close up through that level in order to get confirmation, with a view on the target about 6,600."
(Editing by Catherine Evans)
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