* Fed hike seen as having no impact on liquidity, risk
* SG predicts U.S. index to start outperforming Europe index
* iTraxx Europe 0.75 bps wider, Crossover at 0.5 bps tighter
LONDON, Feb 19 (Reuters) - European credit derivatives indexes were little changed on Friday, recovering from an early morning widening following a Fed hike in the discount rate, as analysts said the increase should have little impact on risk.
In its first move to pull back on crisis-driven emergency support for banks, the U.S. Federal Reserve raised the discount rate on Thursday but left the federal funds interbank lending rate, its main monetary tool, unchanged near zero.
"We believe this is a non-event as the action is simply symbolic in nature and is optically meant to look hawkish but in practicality has no impact on liquidity, and nor should it have any impact on risk premia," BNP Paribas credit strategists said.
"The banks are flooded with liquidity and do not have a need to borrow from the Fed but are instead lending a trillion dollars to the Fed," they added.
By 1019 GMT, the investment-grade Markit iTraxx Europe index was at 88.25 basis points, according to data from Markit. That is 0.75 basis points wider versus late on Thursday, according to data from BGC Partners.
The Markit iTraxx Crossover index, made up of 50 mostly "junk"-rated credits, was at 487.50 basis points, 0.5 basis points tighter.
The initial negative market reaction was predictable, but "pragmatism seems to have taken over, and the indices are looking to edge lower," said Suki Mann, a credit strategist with SG CIB.
"The talk is of a Fed Funds hike in the second half now, instead of Q1 2011, and there will be growing clamour of a move sooner rather than later by the ECB. Don't bet on it," he added.
The U.S. is outperforming on jobs, consumption, investment and growth versus Europe, where economists are lowering growth estimates for the year as countries such as Greece and the UK struggle, he wrote in a note to investors.
Mann predicted the U.S. investment-grade CDX index, which has underperformed iTraxx for the past nine months, would start to outperform and trade inside the main Europe index.
The CDX 125 index was at 95 basis points late on Thursday. (Reporting by Jane Baird; Editing by Jon Loades-Carter)