* Energy firms reverse previous losses
* Food retailers up; Nomura hikes Tesco target
* London Stock Exchange falls on Goldman downgrade
By Harpreet Bhal
LONDON, Oct 21 (Reuters) - Britain's leading shares were flat in early trade on Wednesday, after losses in the previous session, supported by gains in oil majors and food retailers.
At 0830 GMT the FTSE 100 was down 8.95 points at 5,234.44, after closing 0.7 percent lower in the previous session when it hit a fresh high for the year at 5,298.54.
Energy issues recovered from the previous session's falls to add the most points to the index, as crude prices hovered around $79 a barrel, just short of its year-high at $80.05 hit on Tuesday. BG Group, BP and Royal Dutch Shell rose 0.3 to 0.7 percent
Food retailers were higher, led by a 2.2 percent gain in Tesco after Nomura upped the stock's target price to 526 pence frm 405 pence with a "buy" rating. Sainsbury was up 1.3 percent, adding to speculative gains from the previous session while WM Morrison rose 1.5 percent.
"Markets today are struggling a little bit for direction and that is summed up by the mixture of cyclical and defensive stocks that we've got at the top end of the FTSE," said Keith Bowman, analyst at Hargreaves Lansdown.
Among individual gainers, plumbing supplies group Wolseley rose 3.5 percent after BofA Merrill Lynch upgraded its stance on the stock to "buy" from "underperform".
The broker also upped its recommendation on blue chip real estate firms Hammerson, to "buy" from "neutral", and Land Securities, to "neutral" from "underperform". The shares rose 1.6 and 0.6 percent respectively.
The FTSE 100 has so far rebounded 52 percent since hitting a floor in March, and crossed the 5,200 level for the first time in over a year last week on growing optimism about the outlook for corporate earnings.
Later in the session, investors will look to minutes from the last Bank of England's (BoE) Monetary Policy Committee interest rate setting meeting, to be released at 0830 GMT, for further clues on the outlook for interest rates and quantitative easing.
With the quarterly earnings season under way in the United States, investors will keep a close eye on results from Morgan Stanley for signs of recovery in the banking sector.
In a speech to Edinburgh business groups late on Tuesday, BoE Governor Mervyn King said a fundamental rethink of how the banking sector is structured was needed to prevent a recurrence of the financial crisis.
LSE UNDER PRESSURE
London Stock Exchange shed 3.2 percent, the biggest FTSE 100 faller, after Goldman Sachs cut its rating on the firm to "neutral" on valuation grounds and removed the stock from its Pan-European "Conviction buy" list.
Prudential fell 1 percent. The Financial Times reported that the life insurer is thought to be conducting a preliminary assessment of the likely benefits of a separate listing in Shanghai or Hong Kong.
Within the sector, Aviva, Old Mutual, and Standard Life shed 0.2 to 0.3 percent.
Home Retail fell 2.3 percent as the retailer met forecasts with flat first-half profits and said it was planning cautiously for the future.
BAE Systems, BSkyB, Smiths Group and Whitbread traded ex-dividend, taking a total of 1.85 points off the index.
In the wake of record public sector borrowing figures released on Tuesday, a leading think tank said on Wednesday that repairing Britain's public finances will require tax rises, spending cuts and increases to the retirement age far beyond those currently on the political agenda.
On the economic front, investors will focus on the CBI Industrial Trends for October at 1000 GMT. Factory order books are likely to have recorded a modest improvement this month, reinforcing the view that any economic recovery is expected to be slow. (Editing by Rupert Winchester)