BP boost pulls FTSE higher on first session of June

A man walks past the London Stock Exchange in the City of London October 27, 2008.

LONDON (Reuters) - A jump by BP shares helped Britain's top shares start June with gains on Friday after the benchmark index suffered its worst month in more than three years in May, dragged down by widespread economic concerns.

BP (BP.L) gained 3.7 percent and accounted for two-thirds of the FTSE 100's .FTSE gains as the British oil major said it will look to sell its shareholding in TNK-BP after receiving unsolicited indications of interest in its stake in the Russian joint venture.

"The cash inflow from the sale would effectively wipe out BP's current net debt and open up a number of strategic alternatives and arguably satisfy some critics' views that the company should shrink to grow," Oriel Securities said in a note, repeating its "hold" rating on BP shares.

At 0805 GMT, the UK blue chip index was up 19.56 points, or 0.4 percent, at 5,340.42, having closed 0.5 percent higher on Thursday following an official recalculation of the index late after the market close because of problems with data from a third-party vendor, index provider FTSE said.

The UK benchmark index still finished May 7.5 percent weaker, notching up a third straight month of losses.

"Losses over the past few weeks have been substantial with May turning out to be a rather horrific month for many stocks for the third year running, it might just be the case that stocks have dropped a bit too quickly with much of the current bad news already priced in leaving plenty of scope for positive surprises," said Markus Huber, head of German trading at ETX Capital.

Miners .FTNMX1770 lent their strength to the blue chips, with the sector higher in tandem with a rise in the price of copper, mainly on short-covering after prices hit their lowest level so far this year in the previous session.

Disappointing Chinese manufacturing data had little effect as investors had already priced it in, traders said. China's official purchasing managers' index - covering the country's biggest, mainly state-backed firms - fell more than expected to 50.4 in May, the weakest reading this year and down from April's 13-month high, with output at its lowest since November 2011.

Banks .FTNMX8350 also pushed ahead, with the hard-pressed sector rallying as concerns over euro zone debt crisis exposure were shelved for the time being by a lack of fresh bad news.

Lloyds Banking Group (LLOY.L) was up 1.0 percent. New British banking venture NBNK (NBNK.L) said talks with Lloyds over the possible purchase of 632 branches were going well and the UK's financial regulator was happy with its plans so far.

DEAD MAN BOUNCE

Hedge fund manager Man Group (EMG.L) was the top blue chip gainer, bouncing 6.0 percent higher in a probably forlorn, last-ditch attempt to avoid relegation from the top-flight.

Man Group's demotion to the FTSE 250 .FTSE index is expected to be confirmed after the market close next Wednesday when the latest FTSE indexes quarterly review will take place.

The review will be based on the closing prices from Friday this time, rather than the Tuesday before the review as usual, because of the two British Jubilee bank holidays next week.

Trading volumes were fairly thin in London ahead of the long holiday weekend, at 12 percent of the 90-day daily average, with investors also reluctant to get too involved ahead of the latest U.S. jobs report, due for release at 8.30 a.m. EDT.

May U.S. non-farm payrolls are seen rising by 150,000 on the month, and the unemployment rate expected to hold steady at 8.1 percent in May.

"With traders expecting some kind of stabilization after most recent declines in job growth, a further weakening would certainly renew calls for the Fed to step in and to provide some form of assistance to the struggling economy," ETX's Huber said.

On the domestic data front, the Markit/CIPS British manufacturing PMI report for May will be released at 4.28 a.m. EDT.