* FTSEurofirst 300 up 0.1 pct, Euro STOXX 50 slips 0.2 pct
* S&P downgrade to Spain pegs back European equities
* Gains at Carrefour, Burberry push some indexes intopositive territory
By Sudip Kar-Gupta
LONDON, Oct 11 (Reuters) - A rating cut that added toconcerns over Spain pegged back European equities on Thursday,although gains in major retail and fashion stocks enabled somekey indexes to edge into positive territory.
The euro zone Euro STOXX 50 index fell 0.2percent to 2,452.19 points, but the broader pan-EuropeanFTSEurofirst 300 index rose 0.1 percent to 1,091.41points.
A creeping return of fears over Europe's sovereign debtcrisis were highlighted by the Standard & Poor's downgrade lateon Wednesday, which adds to pressure on Spain to seek asovereign bailout.
The downgrade pushed up Spanish bond yields as well as thoseof Italy, also under pressure from the region's economicproblems, and Spain's IBEX stock market fell 0.8percent.
"We are still avoiding southern European equities, we'resticking more to core European equity markets such as the UK,"said Cyrille Urfer, head of asset allocation at Swiss bankGonet.
Some of those core European markets - such as Britain's FTSE
and France's CAC-40 - rose on Thursday followinggains on stocks such as UK luxury clothing retailer Burberry
and French supermarket retailer Carrefour .
Burberry, whose shares slumped last month after a profitwarning, rose 7.7 percent as it reported a rise in first-halfunderlying revenues.
Carrefour rose 4.5 percent after reporting that sales in itscore French market were improving, while its Brazil businessremained strong.
The underlying economic uncertainty has meant that manyinvestors have favoured "defensive" stocks - companies seen asthe most resilient to the economic slowdown and with a largeglobal reach - to more "risky" sectors such as banks or miners.
"We still like the defensives, the companies with the largefranchises," said Urfer.
Equity markets have rallied since July, when world monetaryauthorities including the European Central Bank (ECB) pledgednew measures to fight off the effects of the euro zone crisisand global economic slowdown.
However, markets have fallen back from peaks reached inmid-September due to uncertainty over the timing of any eventualSpanish bailout request, as well as worries that the centralbanks' actions have failed to stem the economic slowdown.
"We're continuing to see weaker economic numbers and theeuro zone issues are still there. The euro zone will dominatethe month of October," said TJ Markets' head of trading ManojLadwa.
Adrian Slack, head of equities at Bastion Capital, said hestill expected European equity markets to remain under pressurefor this month.
Slack said the Euro STOXX 50 could fall down to around 2,396points, while Germany's DAX could go down to the 7,151point level.
(Reporting by Sudip Kar-Gupta; editing by Patrick Graham)
Keywords: MARKETS EUROPE STOCKS/OPEN