* FTSE 100 edges up by 0.5 pct as charts hint at more gains

* Lloyds leads rally in financials

* Barclays (LSE: BARC.L – news) strategists forecast weak sales for retailers

By Toni Vorobyova

LONDON, Jan 7 (Reuters) – Britain’s blue chip share index touched a one-week high on Tuesday, with gains in financial stocks pushing the FTSE 100 towards major technical resistance levels and overshadowing weakness in retailers.

Lloyds was the top gainer, rising 2.4 percent, as investors bought the stock on expectations the bank will start paying dividends this year, and that it will benefit from a recovering British economy and housing market.

Lloyds is expected to announce a payout to shareholders on its 2013 results, with StarMine consensus pointing to a dividend yield of 0.4 percent this year, rising to 3.1 percent next year.

“Lloyds is a domestic story – if the property market is going to do well, then the leverage you get out of Lloyds is great, plus they are going to pay a dividend this year, so the income funds will be buying them,” said Zeg Choudhry, head of equities trading at Northland Capital.

Bolstering the British economic recovery story, car sales rose to their highest level since 2007 last year, data showed on Tuesday, while British businesses reported strong growth and rising confidence.

Analysts at Bernstein Research highlighted Lloyds as the top pure play on UK consumers, while noting that RBS (LSE: RBS.L – news) looks promising on valuation and that HSBC is likely to increase its risk appetite in the region.

RBS shares rose 1.3 percent, while HSBC – the biggest constituent in the FTSE 100 – added 1.5 percent.

The gains helped boost the overall index, which was up 31.62 points, or 0.5 percent, at 6,762.35 points by 1149 GMT, closing in on its Dec. 30 high of 6,768.44 points.

“Technical studies are generally constructive across the daily/weekly/monthly time frames,” said Ed Blake, technical analyst at Informa Global Markets.

“Only a failure to clear 6,768.44 followed by a return through 6,699.27 would caution bulls and risk a deeper near-term corrective setback.”

However, for now, overall FTSE 100 gains were capped by weakness in retailers, many of whom are due to issue trading updates later this week.

Supermarket retailers have been hit by losing market share to German rivals Lidl and Aldi, while clothing companies have had to contend with fierce competition on the High Street, with Debenhams (Other OTC: DBHSY – news) already issuing a profit warning in December.

Barclays equity strategists forecast lower sales for Sainsbury, Morrison and Tesco (Xetra: TCO.DE – news) , and warned M&S could miss its gross margin target.

Barclays comments also weighed on Burberry, with the bank saying third-quarter sales at the luxury group – due on Jan. 15 – “need to show strong comparable sales growth to retain confidence in the second-half forecasts”.