* FTSE down 0.1 percent
* Caution over Europe growth, U.S. jobs
* Banks top fallers curbed after recent gains
* Tate & Lyle boosted by pension deal
By David Brett
LONDON, Dec 7 (Reuters) - Britain's FTSE 100 was flat early on Friday as caution over growth in Europe and U.S. jobs data prevented the index punching through fresh two-month highs, although momentum for the time being remains on the upside.
London's blue chip index was down 2.28 points points at 5,899.14 by 0855 GMT, having closed at its highest level since mid October in the previous session.
Volumes were at just 5.9 percent of their 90-day daily average, compared with roughly 10 percent usually by that time.
"(Thursday's) move puts the index in a position to rally further if investors decide to bite the bullet and buy strength," James Hyerczyk, an analyst at Autochartist, said.
"Based on the strong close, it looks as if sentiment is still to the upside; however a break back under 5,852.90 will signal that momentum has shifted back to the downside," he said.
The index was struggling after Germany's Bundesbank cut its outlook for next year to say it expects minimal growth, and there was slight caution ahead of November U.S. jobs data that is expected to be weaker than October's, hit by superstorm Sandy.
The rally of more than 5 percent in the last two weeks on the FTSE 100, fueled by an easing of worries over the euro zone and the U.S. fiscal cliff, has left the index at the top of a range established since September.
"The feeling is that although there are still many issues to be resolved they are broadly moving in the right direction," Tim Rees, UK fund manager at Insight Investment, said.
"That does not mean we are not going to get a fright somewhere down the line but you can see why, in the absence of falling off a cliff, equities have a value attraction on an historical basis in comparison to other assets classes," he said.
Rees said he is fully invested and has been "risk on" for sometime now, taking advantage of cheap stocks like those on the FTSE 100, which is trading on a price-to-earnings of 11.8 times compared with the 10-year historical average of around 14 times.
At the micro level on Friday, the downside was dominated by recent good gainers such as the banks with heavyweight HSBC and Standard Chartered down 0.7 percent and 1.6 percent respectively.
"Banks will be structurally unattractive in a deleveraging and low interest rate environment, given the continuing banking and sovereign crises," Nomura said in a note, although it rates HSBC and Standard Chartered among its top picks
On the upside, Tate & Lyle was the top gainer up 1.5 percent after the British starches and sweetener maker struck deal over its pension scheme, which will see no material impact on group`s cash flows or adjusted earnings.
Written by David Brett