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Defensives lead FTSE 100 higher ahead of BoE rate decision
* FTSE 100 up 0.2 percent
* Consumer staples lead after bullish CS note
* Aggreko rises as it ramps up dividend
* IMI buoyed by buyback promise
* Aviva tumbles after slashing dividends
By David Brett
LONDON, March 7 (Reuters) - Britain's top share index rose early on Thursday in cautious trade, led by defensive stocks such as consumer staples ahead of the Bank of England's midday policy announcement, with financials mixed after Aviva slashed dividends.
By 0848 GMT, London's blue chips were up 20.97 points, or 0.3 percent, to 6,448.61, taking their cue from strength overnight in the United States, where the Dow Jones Industrial Average ended at another record high after some positive job figures.
Consumer staples such as Unilever and consumer health goods maker Reckit Benckiser were among the top gainers as Credit Suisse argued the sector was not expensive and raised target prices on names under its coverage by up to 20 percent.
Another defensive stock - companies whose products and services remain in demand even in austere economic periods - water utility Severn Trent, meanwhile, rose 1.1 percent as Credit Suisse upgraded the company to "neutral" from "sell" and increased its target price to 1,530 pence from 1,460 pence.
Gains were cautious with the Bank of England expected to hold interest rates at a record low 0.5 percent at 1200 GMT, although chances are rising that the BoE will decide to start buying assets again to support a weak economy.
"Despite no chance of a rate cut from the BOE today, the continued improvement in U.S. economic data and a possible 25 billion pounds increase in the UK's QE program would suggest that there is still room for equity markets and the FTSE100 index to continue higher," Adam Seagrave, equity Trader at Saxo Bank, said.
While the Dow on Wall Street continues to set fresh all time highs London's FTSE 100 remains around 4.5 percent off its all time highs struck in 2007.
With the global economy still recovering, markets are relying on support from central banks' loose monetary policy, which is suppressing yields in other asset classes such as bonds and cash.
The top individual risers on the FTSE 100 were those companies promising higher returns to investors.
The world's biggest temporary power provider, Britain's Aggreko, rose 8.4 percent after raising its dividend by 15 percent with full-year profit up 11 percent.
Engineer IMI climbed 4 percent after it said it planned to buy back up to 175 million pounds ($263 million) of its shares over the next 12 months.
While British insurer Standard Life climbed 2.5 percent after it said its shareholders would get a 302 million pound ($455 million) windfall.
The big news was life insurer Aviva, which tumbled 14.4 percent after it cut its dividend by over a quarter to provide extra funds for a turnaround strategy aimed at bolstering capital and profit.
Aviva followed the route of sector peer RSA earlier in the month.
"A 15 percent (fall in Aviva) seems harsh and severely overdone. At 19 pence the dividend yield is still over 6 percent at these prices, I would be snapping these up for a bounce and the longer term yield," said John Truong, Senior Trader at Accendo Markets. (Editing by Hugh Lawson)
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