UPDATE 1-RBS upgrades Thomson Reuters to hold

(Adds analyst's comments, background)

Oct 29 (Reuters) - The Markets division of Thomson Reuters (TRIL.L: Quote, Profile, Research) (TRI.TO: Quote, Profile, Research) looks better positioned to weather a cyclical slowdown than Reuters Plc was when it entered the downturn of 2002 to 2004, RBS Research said as it upgraded the stock to "hold."

"We set out what would lead us to turn positive on what we see as a high-quality long-term story, albeit one on the cusp of a cyclical downturn in the Markets division," the brokerage said.

RBS, which previously had a "sell" rating on the stock, said it no longer saw a material valuation downside for Thomson Reuters shares, but added it was still too early to buy. The current economic downturn appears far more severe for the banking industry than the tech bubble correction of the early 2000s, RBS said.

"We now assume that the peak-to-trough decline in revenues at the Markets division will be the same as that experienced by Reuters in 2002-04 (a 22 percent decline)," it said.

Thomson Reuters Markets division includes the Reuters and Thomson news operations as well as financial services data and tools.

The brokerage estimates revenue declines in the Markets division of 6 percent in 2009, 12 percent in 2010 and 4 percent in 2011.

"But we believe this is now largely priced into the shares," RBS said. At 0811 GMT Thomson Reuters shares were up 6 percent at 1019 pence on the London Stock Exchange. (Reporting by Tenzin Pema in Bangalore; Editing by Mike Miller)