* FTSE 100 index sheds 0.4 percent
* Tesco tops fallers list as trading update disappoints * Tobacco stocks hit by BofA ML downgrades
By Jon Hopkins
LONDON, Jan 13 (Reuters) - Britain's leading share index fell on Thursday, as a disappointing trading update from Tesco upset food retailers and tobacco stocks were hit by a broker's downgrade.
At the close, the FTSE 100 was down 26.84 points, or 0.4 percent, at 6,023.88, after hitting a 31-month closing peak on Wednesday.
Tesco was the biggest FTSE 100 faller, down 4.3 percent after the world's third-biggest retailer missed Christmas sales forecasts.
"Tesco's figures are proof that bigger is not always best and while it has managed to hold its share of the UK grocery market ... further gains are likely to be limited," said Manoj Ladwa, a senior trader at ETX Capital.
Weakness in tobacco issues was a big drag on UK blue chips, as negative broker comment hit both British American Tobacco and Imperial Tobacco, down 3.6 and 1.3 percent respectively
BofA Merrill Lynch downgraded its ratings for the two cigarette makers to "neutral" from "buy".
Utilities were also fallers as defensively perceived stocks retreated, with United Utilities down 2.7 percent.
Miners were lower, led by Antofagasta down 2 percent as copper fell, with the metal's price pausing after two days of gains as investors worried about demand waning in China as the top metals consumer approaches its New Year holiday.
And energy issues were led down by Royal Dutch Shell, off 0.4 percent, with traders citing talk that the oil major was guiding analysts lower on its earnings outlook.
RBS, LLOYDS HIGHER
Part-nationalised lenders Royal Bank of Scotland and Lloyds Banking Group gained 3.5 percent and 1.2 percent respectively, as domestic banks bounced back with eurozone debt concerns seeing some relief.
After Portugal's debt auction on Wednesday, Spain and Italy successfully sold a combined 9 billion euros ($11.83 billion) of debt on Thursday, underpinned by hopes that policymakers may soon shore up the region's fiscal defences.
Among other financials, insurers also saw good support with Resolution standing out, ahead 3.7 percent.
Engineer IMI was the top blue-chip performer, up 4.2 percent, after BofA Merrill Lynch upgraded its rating to "buy".
"We have clung on to the 6,000 level but are making fairly heavy weather of it, with two steps forward and one step back," said David Morrison, market strategist at GFT Global.
"The eurozone debt problems have eased but not gone away, we've got the earnings season to negotiate, and there is some big economic data from the U.S. to come," Morrison added.
U.S. blue-chips were 0.1 percent lower by the London close after the latest weekly jobless claims rose unexpectedly.
On the domestic economic front, British industrial output grew at its slowest annual pace in four months in November, dragged down by weakness in the oil and gas sector.
The Bank of England kept its key interest rate at a record low 0.5 percent, as expected, for the 22nd consecutive month following the latest monetary policy committee meeting.
(Editing by Erica Billingham)