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Burberry leads Britain's FTSE 100 up from 1-week lows

* FTSE 100 up 0.2 pct, off an earlier one-week low

* Burberry rebounds after trading update

* Some positive spin seen to Spanish downgrade

By Toni Vorobyova

LONDON, Oct 11 (Reuters) - Britain's FTSE 100 share index edged up from one-week lows on Thursday, with concerns about the euro zone crisis offset by signs of slightly better trading at luxury fashion house Burberry

.

A downgrade in Spain's credit rating by Standard & Poor's to just above junk after market close on Wednesday underscored the problems faced by the euro zone.

The news hit Spanish shares and pushed up its bond yields, but other markets saw some positivity, speculating that Madrid may now be under more pressure to formally ask for help, kick-starting the European Central Bank's bond buying rescue plan.

"It sounds like bad news, but I think there is potentially a silver lining to it in that a downgrade might force Spain to ask for a bailout so it potentially increases the chances of that," said James Butterfill, global equity strategist at Coutts.

Britain's FTSE 100

was up 12.29 points, or 0.2 percent at 5,788.00 by 0749 GMT, in jittery morning trading which saw it set its lowest level since Oct. 1 before yo-yoing either side of the no-change.

Burberry was the biggest positive weight on the index, its shares rising 7.9 percent after the checked raincoat designer, which issued a profit warning last month, reported an improvement in trading in September.

With analysts still slashing earnings expectations, any good news - or simply the lack of fresh bad news - is increasingly able to move shares higher, enabling Burberry to recover some of the 28 percent drop seen since the profit warning.

"The profit warning on Sept. 11 looks to have been a bit premature," Nick Bubb, independent retail analyst, said in a note. "The retail second quarter like-for-like of plus 1 percent was a bit better than feared, thanks to a modest pick-up in the last three weeks of the period, reversing the negative trend seen in the two-three weeks before that."

Among the UK corporates expected to report third quarter results, profits are on average seen down 7.5 percent year-on-year and Thomson Reuters Starmine predicted surprise indicator suggests that the actual figures will be slightly better.

That could enable the FTSE 100 to play catch up with the pan-European FTSEurofirst 300

, which is up nearly 9 percent for the year-to-date against gains of 3.7 percent for the UK index.

"In the UK, there is a greater chance of upside support to the FTSE 100 given that it's underperformed recently," Butterfill at Coutts said.

(Editing by Janet Lawrence)

((antonina.vorobyova@thomsonreuters.com)(+44 207 542 9828)(Reuters Messaging: antonina.vorobyova@thomsonreuters.com))

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