FTSE falls in light trade, Tesco weak before update
* FTSE 100 down 0.6 percent, trading volume light
* Analyst comments knock Tesco ahead of trading update
* Debenhams down; Barclays cuts to "underweight"
* Technical analysts see support for FTSE at 6,586
By Tricia Wright
LONDON, Dec 2 (Reuters) - Britain's top shares dropped on Monday, with Tesco a big faller on analyst downgrades ahead of a trading update later in the week, while signs of weakness in the euro zone economy took their toll on broader sentiment.
Spain's manufacturing sector contracted for the first time since July, underscoring the fragility of the recovery in the euro zone, Britain's top trading partner.
While the British economy is improving - with job growth pushing UK manufacturing to a near three-year high in November, data showed on Monday - consumer demand remains fragile, forcing retailers into stiff price competition.
Tesco was among the top fallers, down 2.6 percent at 338.85 pence after HSBC downgraded it to "underweight" saying the company needs to lower margins, while Goldman Sachs lowered its third quarter earnings estimates for the firm.
The world's third-biggest retailer is expected to slip back to an underlying sales decline in Britain when it publishes quarterly trading on Wednesday.
"I think it's going to disappoint ... It really needs to properly focus on the UK going into the smaller shops. It is still losing market share to pretty much everyone ... It just doesn't seem to have a clear strategy," said Joe Rundle, head of trading at ETX Capital.
However, support should kick in around the year's low at 325 pence, he added.
Tesco's sector peer Debenhams was among the biggest laggards on the FTSE 250, off 3.8 percent, as Barclays cut its rating on the department store retailer to "underweight" blaming margin dilutive online sales.
The FTSE 100 was down 42.19 points, or 0.6 percent, at 6,608.38 points by 1153 GMT, albeit in light volume at around a quarter of the 90-day day average, exaggerating market moves.
But technical analysts saw scope for a recovery on the UK benchmark, which has been trending lower since the end of October. The index has risen around 12 percent in 2013.
"It does seem to be in a flat consolidation phase at the moment (but) I don't see any marked impact on the overall skew to the upside," said Lynnden Branigan, analyst at Barclays Capital.
He reckoned that buyers would come back in towards the 100-day moving average, at 6,586, giving the index a platform from which to climb back up towards the Nov. 18 high of 6,732.