European shares edge up; Japan downgrade weighs

                                
 * FTSEurofirst 300 index up 0.2 percent
                                
 * H&M drops after quarterly profits fall
                                
 * Randgold gains on HSBC upgrade
                                
 * For up-to-the minute market news, click on [STXNEWS/EU]
                                
 By Joanne Frearson
                                
 LONDON, Jan 27 (Reuters) - Gains in mining sector shares
helped European shares edged higher after a softer start on
Thursday, although a downgrade of Japan's credit rating by
Standard & Poor's limited gains.
                                
 By 1003 GMT, the pan-European FTSEurofirst 300 <.FTEU3>
index of top shares were up 0.2 percent at 1,155.66 points in
choppy trade after being as low as 1,150.12.
                                
 The index gained 0.8 percent on Wednesday as U.S. President
Barack Obama's corporate tax cuts plans boosted market
sentiment.
                                
 "It is a little bit edgy out there, the S&P downgrade of
Japan's credit rating has made investors a little bit nervous
and the market has not been able to hold on to gains," Giles
Watts, head of equities at City Index, said.
                                
 "Investors are just range trading after a decent move
yesterday. I think it is just going to drift lower today."
                                
 Investor sentiment was hurt after ratings agency Standard &
Poor's said Japan lacked a coherent plan to tackle its mounting
debt and cut Japan's sovereign debt rating to AA minus from AA.
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 Comparison of countries' debt and deficit levels http:
                                
  //r.reuters.com/byz67r
                                
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 Gains in mining shares helped underpin the market, with
Randgold Resources <RRS.L> rising 5.8 percent after HSBC
Securities assumed coverage on the company with an "overweight"
rating, previously "neutral".
                                
 Elsewhere in the sector, Kazakh miner Kazakhmys <KAZ.L>
gained 2.3 percent after its fourth-quarter production report.
The company also benefited from a broker upgrade after Evolution
Securities raised it to "add" from "reduce"
                                
 
                                
 H&M DROPS
                                
 On the downside, the retail sector was among the worst
performers, with the STOXX Europe 600 Retail <.SXRP> down 1.2
percent.
                                
 Swedish budget fashion giant Hennes & Mauritz <HMb.ST>
dropped 5.9 percent after it posted a surprise fall in pretax
profit. [ID:nLDE70Q08M]
                                
 "It is quite a significant miss again, as it was in Q3,"
said Bryan Garnier analyst Peter Farren. "I think Q4 says the
story of what I think of the stock -- the actual product
offering is not very competitive and therefore they have to
reinvest into lower prices or higher quality for the same
price."
                                
 Rival retailers Inditex <ITX.MC>, Marks & Spencer <MKS.L>
and Next <NXT.L> fell 0.6 to 2.4 percent.
AstraZeneca <AZN.L> gained 1.9 percent after the
Anglo-Swedish drugmaker beat fourth quarter earnings and
promised to buy back $4 billion of shares. [ID:nLDE70K0AX]
                                
 On the macro-economics front, the Fed unanimously agreed on
Wednesday to continue with the its $600 billion bond-buying plan
and said high unemployment justified this decision.
[ID:nN25283937]
                                
 The move was widely anticipated.
                                
 Across Europe, the FTSE 100 <.FTSE> index was down 0.04
percent, Germany's DAX <.GDAXI> was 0.1 percent higher and
France's CAC 40 <.FCHI> was down 0.2 percent.
 (Reporting by Joanne Frearson. Editing by Jane Merriman)