* FTSE falls 0.5 percent as recovery concerns hit sentiment
* Banks drop as S&P cuts Ireland's credit rating
* Energy, miners drop as risk appetite ebbs
By David Brett
LONDON, Aug 25 (Reuters) - Europe's sovereign debt issues and global recovery concerns weighed on Britain's top share index on Wednesday after Standard & Poor's downgraded Ireland's credit rating, which more than offset good UK company results.
By 1050 GMT the FTSE 100 was down 23.53 points, or 0.5 percent, at 5,132.42., after closing 1.5 percent lower at 5,155.95 on Tuesday, its lowest finish since July 20.
The index faced strong resistance at around 5,189.73 -- its 38.2 percent Fibonacci retracement of a fall from a high in April to a low in July.
Recent concerns surrounding the sustainability of the global economic recovery were given credence after Standard & Poor's cut Ireland's long-term rating by one notch to 'AA-', the fourth-highest investment grade, and assigned the country a negative outlook late on Tuesday..
"The market is very data driven at the moment and there's not a lot of good news to go on," said Philip Gillett, trader at Spreadex.
UK banks were among the top fallers, echoing the struggles of their Irish counterparts, with Royal Bank of Scotland down 0.9 percent.
British 10-year gilt yields fell to a record low of 2.825 percent on Wednesday, compared to a dividend yield of 3.54 percent for UK blue-chip equities.
Valuations for the UK benchmark remained cheap. Its one-year forward price-to-earnings stood at 9.96 against a 10-year average of 14.88, according to Thomson Reuters Datastream.
On the macroeconomic front, U.S. durable goods are due at 1230 GMT, while July's U.S. new home sales and the Federal Housing Finance Agency house price index for June are both due at 1400 GMT.
ENERGY DRAIN
Energy shares retreated sharply as investors sold out of riskier assets. Oil explorer Tullow Oil shed 5.6 percent. It said development of its Ugandan oil fields would be delayed, which overshadowed upbeat results.
Cairn Energy bucked the trend, adding 0.5 percent as UBS upgraded its rating, arguing there is potential upside to its sale of Cairn India and a gas discovery in Greenland.
State-run Oil and Natural Gas Corp is divided over making a counter-bid for Cairn India, which is the target of a $9.6 billion takeover offer by Vedanta, the Business Standard paper mreported on Wednesday.
Miners were lower, with BHP Billiton down 0.3 percent as a cautious outlook took the shine off soaring second-half profits.
"After the credit crisis firms have become more efficient but now those efficiencies have been implemented the problem they have now is whether the outlook is that strong, and the consensus is that it is not," Spreadex's Gillett said.
BHP also tried to dampen expectations it would substantially raise its hostile $39 billion bid for Potash Corp, saying it won't buy Potash at any cost.
Miners African Barrick Gold and Fresnillo rose 0.3 and 0.2 percent respectively as investors sought the safe-haven qualities of precious metals.
On the upside, Admiral Group topped the FTSE 100 leader board, up 3.8 percent. The car insurer said it expected a strong full year, adding to recent robust earnings reports from the top UK insurance companies.
Serco rose 2.8 percent after the British outsourcing company said half-year pretax profit was up more than 20 percent, defying concerns that support services companies will suffer from swingeing government spending cuts. (Editing by Michael Shields)