Britain's FTSE edges up as pound dips on Brexit deadlock

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* FTSE 100 up 0.2 pct

* Slid in pound backs UK shares

* Provident shares sink on Moneybarn investigation

* Tesco (Frankfurt: 852647 - news) leads gainers after upgrade

By Julien Ponthus

LONDON, Dec (Shanghai: 600875.SS - news) 5 (Reuters) - The UK's top share index edged up on Tuesday, outperforming European peers as sterling slid in the wake of Prime Minister Theresa May's failure to clinch a deal to open post-Brexit free trade talks with the European Union.

The blue chip FTSE 100 index was up 0.2 percent at 7,351.38 points by 0953 GMT, while the pan-European Stoxx retreated by the same extent into negative territory.

The fall in sterling since the June 2016 Brexit vote has given an accounting boost to UK blue chips that generate revenues in dollars, and a weak pound typically supports the FTSE.

With (Other OTC: WWTH - news) no certainty over whether the UK and the European Union will be able to make a breathrough on a divorce settlement, the pound is likely to continue to fluctuate and weigh on share prices.

"Yesterday's fluctuations in the pound exchange rates were only a first taste of what is to come," Commerzbank (Xetra: CBK100 - news) said in a note to clients.

Supermarkets posted by far the best performance of UK blue chips. with Tesco and Sainsbury (Amsterdam: SJ6.AS - news) rising 3 percent and 2.4 percent.

Goldman Sachs (NYSE: GS-PB - news) raised its rating for Tesco to "buy" and said margin pressure in the UK grocery market was easing.

A number of miners were in negative territory as base metals slipped into negative territory, with investors locking in profits on recent gains in nickel and copper.

Antofagasta (Other OTC: ANFGF - news) and Glencore (Frankfurt: 8GC.F - news) were down 1.5 percent while Rio Tinto (Hanover: CRA1.HA - news) fell 1 percent.

Standard Chartered (BSE: 580001.BO - news) , with a 1.4 percent rise, was the top gainer among financials after JP Morgan raised its rating and included the stock in its EU bank top picks list.

In the same sector, British lender Provident Financial (Other OTC: FPLPF - news) shares collapsed 13 percent after the UK's financial watchdog opened an investigation into Moneybarn, its car and van financing arm.

British movie theatre operator Cineworld Group Plc (LSE: CINE.L - news) lost 3.7 percent after it said it reached an agreement to buy U.S. peer Regal Entertainment Group RGC.N for $3.6 billion.

(Reporting by Julien Ponthus; Editing by Georgina Prodhan)