Britain's FTSE eases, still posts best week in 3 months

* FTSE 100 down 0.5 percent on day

* Technical charts show room for more gains

* HSBC upgrades British equities to 'overweight'

By Toni Vorobyova

LONDON, April 12 (Reuters) - Britain's FTSE 100 edged loweron Friday, with concerns about a fresh flare up of the euro zonecrisis and weak U.S. data prompting investors to take someprofits on the index's best week in three months.

News that Cyprus is considering asking the EU to front loadthe payment of structural funds reignited concerns about thecost of bailing out euro zone states.

Appetite for risk assets was further hurt by unexpectedfalls in U.S. retail sales and consumer sentiment, which fanneddoubts about the strength of the recovery in the economy whichaccounts for around a quarter of revenues for British bluechips.

With FTSE 100 investors already sitting on 2.7 percent gainsfor the first four days of the week, that proved a sufficientcatalyst for profit-taking before the weekend.

The blue chip index closed down 31.75 points, or 0.5percent, at 6,384.39 points, but found a floor to the lossesaround the 50-day moving average and still managed to post itsbest weekly gain since early January of 2.2 percent.

"Natural market mechanics would suggest a bit of profittaking after such a strong run," said Ed Woolfitt, trader atGalvan. "Data has been a bit disappointing - retail sales fromAmerica a touch negative, and the consumer sentiment, butbizarrely this market doesn't want to go down much."

He added that he would be looking to take advantage of thedip to buy into the market at cheaper levels.

"We've seen a lot of quality blue chip companies that havebeen caught up in this, that's where we've been aiming. We arenot looking for miners because they are simply too vulnerable."

Metals and miners - some of the strongest performers thisweek thanks to strong economic data from metal-hungry China -took 10.2 points off the FTSE 100 on Friday. Randgold Resourcesdropped 4.6 percent and Eurasian 3 percent.

Banks were the next biggest drag, suffering from theirdirect exposure to the euro crisis through sovereign bondholdings.

Charts, however, showed the technical outlook for the FTSE100 as a whole remained relatively bright.

"Only below 6,326.54 questions the positive view and risks adeeper correction towards 6,290.56," said Chris Wright,technical analyst at Informa Global Markets

"While near-term support ... holds, dips are viewed ascorrective and bulls favoured to resume broader strength for6,501.78, followed by the 6,533.99 year-to-date high."

From a fundamental point of view, too, analysts saw reasonsto buy the British stock market, with HSBC upgrading the countryto 'overweight' from 'underweight'.

"The short-term drivers are positive for the UK, drivenprimarily by earnings momentum. This has rebounded sharply andit is now the strongest in Europe," HSBC analysts wrote.

"This indicates a higher degree of confidence in the 2013earnings outlook. We forecast 9 percent earnings per sharegrowth, an upside surprise versus the consensus estimate of 5percent." (Editing by Ruth Pitchford)