Escalating Ukraine violence caps FTSE 100 despite Shell boost

Wed Apr 30, 2014 4:34am EDT

* FTSE 100 flat as Ukraine violence caps sentiment

* Shell boosted by strong cash flow numbers

* Rolls-Royce rises on Siemens disposal talks

By Francesco Canepa

LONDON, April 30 (Reuters) - An escalation of violence in Ukraine put a lid on British blue chips on Wednesday, offsetting sharp gains in the energy sector, where results for oil major Royal Dutch Shell beat expectations.

Pro-Russian separatists seized control of state buildings in the town of Horlivka, tightening their grip on swathes of Ukraine's industrial east, in a major escalation of their revolt despite new Western sanctions on Russia.

While Britain's top 100 companies make only 0.3 percent of their sales to eastern Europe, Thomson Reuters Datastream shows, tensions between Russia and the West and the prospect of costly sanctions dented appetite for assets which depend on economic growth, such as shares.

"Positive corporate and economic data in recent weeks have unfortunately more or less been neutralised by the events unfolding in Ukraine. For now we are looking to sell into rallies and to buy on weakness," Peregrine & Black senior sales trader Markus Huber said.

Britain's FTSE was flat at 6,771.60 points at 0755 GMT after recording its highest close since March 6 on Tuesday.

"News isn't too bad this morning but we are close to hitting the upper trading ranges again (so) we call for caution at this stage," Huber said.

Shell's two FTSE listings added a combined 24 points to the index after the oil group reported an increase in cash flow in the first quarter of the year, allowing it to increase its dividend by 4 percent year on year.

"Shell significantly beat our expectations," RBC Capital Markets analysts wrote in a note. "Quarterly cash flows are very volatile, but we regard this level as encouraging."

Also in the energy sector, gas group BG Group rose 1.3 percent on speculation, fuelled by a report in the Financial Times, that BHP Billiton might make a bid. The mining group's shares were flat.

"I think the market is taking more notice of these rumours at the moment," Galvan head of trading Ed Woolfitt said. "I'm nor entirely sure about it ... as a deal but with a lot of the recent moves on rumours I shall certainly be trading on it."

Mergers and acquisition activity has been a major driver behind a 4-percent rise in the FTSE over the past two weeks.

Industrial group Rolls-Royce rose 2.2 percent after entering talks with Germany's Siemens AG to sell a unit that makes equipment for the oil and gas industry and power-generation gear for utilities.

Curbing gains on the FTSE was financial services group Standard Life Plc, down 3 percent after saying a move by the British government to liberalise how retirees use their pension pots prompted a 50-percent fall in its annuities after the move was announced in March.

British American Tobacco also fell, trading down 0.8 percent, as it recorded a 12-percent drop in quarterly revenue, which it blamed on adverse foreign exchange moves. Excluding the impact of exchange rates, revenue rose 2 percent.

Nine blue chips, including supermarket Tesco traded ex-dividend, knocking a combined 6.53 points off the FTSE. (Editing by Louise Ireland)