FTSE firmer as Iran tension boosts oil shares

Britain's FTSE 100 (FTSE) index rose by mid-session on Monday as crude prices rose on the back of heightened tensions over Iran, boosting oil shares, and corporate results lent support.

At 1140 GMT the FTSE 100 was up 37 points, or 0.6 percent, at 6,438.5 points, rising for the third day but shy of this year's intraday high of 6,451.4. European share indexes were also higher, while Japan's Nikkei (N225) ended at its highest level in almost seven years.

Mining shares were also in demand as copper prices (MCU3=LX) rose 1.2 percent to $6,345 a tonne and nickel (MNI3=LX) put on 0.8 percent to $41,300 a tonne.

Kazakhmys (KAZ.L) gained 2.6 percent, Anglo American (AAL.L) put on 0.8 percent and Xstrata (XTA.L) tacked on 0.5 percent.

Oil stocks gained as crude prices rose for a fourth day, nearing a fresh 2007 high above $61 a barrel.

BP (BP.L) rose 1.9 percent, while Royal Dutch Shell (RDSa.L) added 0.8 percent and BG Group (BG.L) put on 1.5 percent. "The market has got some momentum behind it. Our view is that shares are somewhat overbought but not overvalued," said Jeremy Batstone, head of research at Charles Stanley.

"The company reporting season seems to be progressing positively, with companies making generally favourable noises regarding the outlook. An attempt on 6,500 and maybe even in due course the all-time high is not inconceivable."

Batstone said market conditions looked rosy but the FTSE would likely face some hurdles in the middle of the week when the United States releases its second reading of fourth-quarter economic data, which is expected to show an annual growth of 2.4 percent revised from an earlier 3.5 percent.

TOP GAINER

Associated British Foods (ABF.L) surged 5.3 percent, topping the gainers' list after it said it saw a rise in operating profit for its financial year to Sept. 2007 but weighted towards its second half, as it gave a trading statement for its half-year to March 3.

Persimmon gained 3.6 percent after Britain's biggest housebuilder posted a 17.5 percent rise in yearly pretax profit and said that it had not experienced any loss of buyer confidence after a surprise January interest rate increase.

Shares in International Power (IPR.L) gained 2.2 percent, buoyed by confirmation that private equity firms Kohlberg Kravis Roberts & Co [KKR.L] and Texas Pacific Group [TPG.L] were acquiring Texas power company TXU Corp. (TXU.N).

"The TXU bid in the U.S. gives more focus on them as a possible bid target again," a trader said.

Old Mutual climbed 4.4 percent after it met forecast with a 22 percent rise in 2006 operating profit and boosted its dividend, but it warned exchange rates and investment in Europe, Sweden and South Africa would hold back earnings growth in 2007.

3i Group (III.L) dipped 0.5 percent after a newspaper report said the private equity group hoped to buy British estate agency Foxtons for around 400 million pounds. 3i declined to comment.

BSkyB (BSY.L) also featured on the downside, shedding 0.4 percent after the pay TV firm said its annual operating profit would take a hit of up to 20 million pounds if it failed to reach a deal for its basic channels to be shown on rival Virgin Media (VMED.O).

Among mid-caps, Alfred McAlpine (MCA.L) nosedived nearly 19 percent after the support services firm said it had found an accounting error at its Slate business that would hit profits in 2006 and 2007. (Additional reporting by Sylvia Westall)

(c) Reuters 2007. All rights reserved