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* FTSE 100 up 0.1 percent, recovering from early falls
* Miners advance; Rio Tinto up on production news
* Burberry higher as trading update prompts upgrade
* ARM weak on downgrades, iPhone 5 demand concerns
By Jon Hopkins
LONDON, Jan 15 (Reuters) - Britain's top share index was modestly higher on Tuesday, recovering from opening falls but staying below a 4-1/2 year peak, with investors seeking fresh impetus to continue the new year's strong rally.
The index ticked up after data showing British consumer price inflation held steady in December, at 2.7 percent for the third month running, while wholesale inflation rose less than forecast.
The data confirmed a benign inflationary environment and leaves room for possible further asset buying by the Bank of England to stimulate a moribund economy.
At 0950 GMT, the FTSE 100 index was down 2.86 points, or 0.05 percent at 6,105.00, having shed 0.2 percent on Monday after reaching its highest since mid-2008 early in the session. The index is up over 2 percent since the start of 2013.
"Although the index has been grinding higher since the first of the year, the rally seems a little laboured, suggesting short-covering or weak buying was driving the market higher," Autochartist analyst James A. Hyerczyk said.
"From 6,053.60 to 6,134.17, the FTSE rallied 80.57 points in four trading days. If the closing price reversal top at 6,134.17 is confirmed on Tuesday, then look for the start of a correction to at least 6,093.35 to 6,082.97 by Wednesday," Hyerczyk added.
Gains by miners provided the main strength for the blue chips, adding over 5 points to the index, as upbeat production news from Rio Tinto buoyed the sector after falls on Monday.
The global miner added 1.0 percent after it said it aims to boost iron ore output by 15 percent this year as resurgent Chinese demand drives a price recovery. Production in 2012 meanwhile climbed to 253 million tonnes, beating the firm's own guidance.
ENRC was also in demand, up 3.3 percent to extend gains made in the previous session following a Credit Suisse upgrade. The Daily Mail newspaper suggested the Kazakh-based miner had also risen on Monday on speculation it had turned down a bid approach from major shareholder Alijan Ibragimov.
Burberry Group was the top blue chip gainer, up 4.0 percent as the British luxury brand posted a 9 percent rise in third-quarter underlying revenue. That prompted BofA Merrill Lynch to upgrade its rating to 'buy' from 'neutral', raise its earnings forecasts by up to 4 percent and highlight the potential for a share buyback.
"The key good news is the recovery of retail (sales) like-for-likes from 1 percent in the previous quarter to 6 percent in Q3," BofA ML said in a note.
"Given the concerns surrounding the brand since the profit warning, this acceleration should support sentiment in the shares."
Negative broker comment weighed on chip designer ARM Holdings - the biggest FTSE 100 faller, down 4.3 percent - with traders citing the influence of downgrades by Morgan Stanley and Investec Securities, both made on valuation grounds.
"We see ARM as the stand-out UK Tech sector play with an exceptional long term business outlook. However a circa 50 percent rise in three months suggests these highly compelling attributes are better reflected in the price," Investec said in a note.
Traders also noted that ARM shares managed modest gains on Monday in spite of big falls by its customer Apple on caution over demand for the iPhone 5, for which the British firm is a supplier.
Volume in both Burberry and ARM shares were almost three-quarters of their 90-day daily average in the first hours of trading, with overall FTSE 100 volume at around 18 percent. (Editing by Catherine Evans)