Britain's FTSE edges up but pegged back by utilities

Mon Feb 10, 2014 4:02am EST

* FTSE 100 edges up 0.1 pct, underperforms Europe

* Centrica, SSE hit after Energy Secretary's concerns

* Broader market tracks Asia higher, eyes on Fed's Yellen

* Petrofac top gainer after HSBC upgrade

By Alistair Smout

LONDON, Feb 10 (Reuters) - Britain's top share index edged higher on Monday, led for a fourth straight session by growth-sensitive stocks, but it underperformed European peers after concerns about government interference knocked utilities.

Utility firms fell after Britain's Energy Secretary Ed Davey wrote to regulators over the weekend saying profit margins of big energy companies' gas supply units were too high.

Davey suggested dominant player British Gas may have to be broken up, the Financial Times reported late on Sunday. Centrica , the owner of British Gas, lost 3.7 percent, the top FTSE 100 faller, while SSE shed 1.6 percent.

Soaring energy costs have become a big political issue in Britain since Labour leader Ed Miliband said last September he would freeze consumer bills for 20 months if he won power.

"The comments from the Labour Party impacted the utilities quite heavily last year and this adds further fuel to the fire," said Manoj Ladwa, head of trading at TJM Partners.

"Initially, it was just the opposition party kicking up a stink, but now it's government ministers, it takes it to a new level and creates uncertainty for companies in that industry."

In all, utilities trimmed 2.5 points off the index, which edged up 5.08 points, or 0.1 percent, at 5,676.76, compared to a 0.3 percent rise on the German DAX and a 0.4 percent gain on the French CAC.

EYES TURN TO FED'S YELLEN

European stock markets were tracking buoyant markets in Asia, where Tokyo's Nikkei led gainers after Wall Street managed to weather a seemingly disappointing U.S. jobs report on Friday.

"We're being entirely driven by the comparatively benign performance by Asian markets overnight, and the sense that the weak payroll number on Friday may encourage the Fed to think about its policies," said Jeremy Batstone-Carr, analyst at Charles Stanley.

New Federal Reserve Chair Janet Yellen will have a chance to show how committed she is to winding down the Fed's support for the economy when she faces U.S. lawmakers on Tuesday, with investors also looking for tweaks to the Fed's "forward guidance" policy of low rates.

Leading gainers were energy services firms. Petrofac was the top riser, up 3.9 percent after HSBC raised the firm to "overweight", saying that risks have been overly discounted given its attractive bid pipeline.

The stock is down 17 percent since early November, with several profit warnings hitting the sector over the last year.