Miners drag on FTSE as China hikes rates, banks slip

* FTSE down 0.3 percent

* Miners slip as China hikes interest rates

* Banks lower as Moody's cuts Portugal debt rating

By David Brett

LONDON, April 5 (Reuters) - Britain's top shares fell on Tuesday after miners fell on China raising rates, while banks were hit by European debt concerns, but analysts said near-term support should keep the FTSE from falling further.

Miners <.FTNMX1770> were lower along with commodities on demand concerns after China's central bank said it was raising lending rates and deposit rates by 25 basis points. [ID:nL3E7F51LX]

"Whilst there's angst about China tightening too aggressively, most investors accept that it's necessary and the alternative is that China don't do enough and inflation becomes embedded. It's a tightrope they're walking," Philip Poole, global head of macro investment strategy at HSBC Global Asset Management, said.

He said moves to keep inflation under control in China would not impact his investment strategy greatly for the year and demand from emerging countries should remain robust.

Vedanta Resources rose 2.5 percent after its chairman said he believed the Indian government would approve its plan to buy Cairn Energy's India assets in the next few days.

Brokers have been bullish on the benefits for Vedanta of the takeover, saying it would be earnings accretive in the first year.

By 1117 GMT, the FTSE 100 <.FTSE> was down 16.66 points, or 0.3 percent, at 6,000.32, having gained in eight of the past nine trading days to end at a six-week closing high on Monday.

Banks <.FTNMX8350> fell as Moody's cut Portugal's sovereign debt by one notch and saying a bailout was needed urgently. [ID:nLDE68T0M]

Barclays and Lloyds Banking Group fell 1.8 percent and 1.2 percent, respectively.

TECHNICAL SUPPORT

Technical analysts said while short-term gains could be limited, longer term the outlook for equities remained bright.

"If we spend the day above 5,970 you've got to still look for it higher ... the absence of reversal signals means our bias would be to stick with the trend," said Phil Roberts, chief technical strategist at Barclays Capital, citing 6,050, the high just prior to the earthquake in Japan, as the next significant level of resistance.

Despite the 8 percent rally on Britain's top share index since March 15, FTSE technical indicators suggested shares remain attractively price.

The index is still trading below over bought territory on its relative strength index.

M&A is seen as a big factor to help drive demand for equities over other asset classes.

TUI Travel rose 3.7 percent on news its German parent TUI AG had found an alternate route to exit its container shipping business Hapag-Lloyd [HPLG.UL] after putting on ice plans for a flotation. [ID:nLDE734073]

M&A prospects in the sector boosted chip designer ARM Holdings 2.1 percent as U.S. firm Texas Instruments Inc announced the acquisition of National Semiconductor Corp . Elsewhere, insurance consolidator Resolution rose 2.6 percent as Citigroup raised its target price.

Rexam gained 1.8 percent after Keybanc initiated the canmaker with a "buy" rating, pointing to "a leaner structure" and more settled business portfolio.

Meanwhile, Vodafone slipped 1.5 percent as Nomura cut its estimates on the mobile communication firm, citing impending changes to Indian telecom policy and a tough Spanish outlook.

National Grid shed 1.8 percent after HSBC cut its recommendation to "underweight" from "neutral".

U.S. stock index futures pointed to a lower open on Wall Street on Tuesday, ahead of ISM non-manufacturing data and the Federal Open Market Committee minutes from the March 15 meeting. (Editing by Louise Heavens)