UK's FTSE rises as ARM rallies

Tue Jul 22, 2014 6:17am EDT

* FTSE 100 up 0.8 pct

* ARM surges after posting higher profits

* Tesco hit by brokers' price target cuts

By Sudip Kar-Gupta

LONDON, July 22 (Reuters) - Britain's top equity index rallied on Tuesday, lifted by technology group ARM which rose after posting higher profits.

Global equity markets were also boosted after pro-Russian rebels complied with calls from Western governments and handed over the black boxes of a Malaysian plane shot down over eastern Ukraine last week.

The blue-chip FTSE 100 equity index was up by 0.8 percent, or 54.45 points, at 6,782.89 points by the middle of the trading day.

The FTSE remains around 1.3 percent below its July high.

The index has come under pressure as tensions between Russia and the West have mounted over the downed plane.

The index has come under pressure as tensions between Russia and the West have mounted over Ukraine, prompting fears of an escalation to economically damaging sanctions on Russia, which Western powers accuse of backing the rebels.

However, Intertrader chief market strategist Steve Ruffley backed buying up equities on days when the market dipped, since the FTSE has proven resilient in terms of bouncing back from lows.

"I can see the FTSE easily reaching record highs of 7,000 points," said Ruffley, adding that the FTSE would get support from Britain's strengthening economy and better corporate earnings.

ARM rose 6.2 percent, making it the best-performing FTSE stock in percentage terms, after the company - which sells blueprints for chip designs - posted higher second quarter profits.

"ARM is the UK's pre-eminent play on the digital economy," said Steve Clayton, equity research partner at Mirabaud Securities.

However, Tesco fell 3 percent as Deutsche Bank and Exane BNP Paribas both cut their price targets on the stock, a day after the supermarket retailer announced a profit warning and a change in chief executive. (Additional reporting by Alistair Smout; Editing by Andrew Heavens)