FTSE up as oil profits flow; cash call lifts HBOS

By Michael Taylor

LONDON, April 29 (Reuters) - Britain's leading share index edged higher on Tuesday as forecast-beating profits helped drive heavyweight oil shares higher, while HBOS HBOS.L gained after announcing a rights issue though some rivals fell.

At 0758 GMT the FTSE 100 .FTSE climbed 32.5 points, or 0.5 percent at 6,123.2 after Wall Street closed flat overnight as economic fears outweighed M&A activity.

Japanese markets closed were closed for a national holiday on Tuesday.

Among the flurry of companies reporting, Royal Dutch Shell (RDSa.L) gained 4.2 percent after the oil major beat all forecasts with a 12 percent rise in first-quarter current cost of supply (CCS) net income, helped by record oil prices which broke $100 a barrel in the period.

Rival BP (BP.L) rose 4.7 percent after it beat forecasts with a 48 percent leap in first-quarter replacement cost (RC) net income, helped by record oil prices and strong profits from punting energy markets.

U.S. crude CLc1 remained at record levels, at $118 a barrel.

"They are outstanding," said David Buik of Cantor Index on the oil updates. "We don't now need people with bleeding hearts talking about how much money they are making - they need it because it's important to have money for exploration so we can get this stuff out of the ground as easily as we can."

Banks reversed earlier losses to trade mainly flat, after HBOS HBOS.L unveiled a 4 billion pound ($7.9 billion) rights issue alongside plans to cut its dividend payout to cover additional writedowns on the value of toxic assets and to shore up its balance sheet.

Britain's biggest mortgage lender, which follows Royal Bank of Scotland (RBS.L) in turning to shareholders for cash, announced 2.8 billion pounds of writedowns, broadly in line with expectations.

Investors cheered the fact that HBOS was trying to shore up its balance sheet but stock in rival Barclays (BARC.L) fell.

HBOS added 1.6 percent, RBS shed 0.1 percent, Lloyds TSB (LLOY.L) gained 0.2 percent and Barclays lost 1.2 percent.

"Who else is going to follow?" Buik said of UK banks. "The one thing we are all worried about with HBOS is, have they gone for enough?"

"I'd like to see them be greedy and gone for more than they really needed," he added.

Sentiment in financials wasn't helped by Deutsche Bank (DBKGn.DE), which made its first quarterly loss in five years as the cost of the global financial crisis mounted for Germany's biggest bank.

But Friends Provident FP.L advanced 1.8 percent as it posted an 11 percent rise in first-quarter premiums, due to higher sales in its overseas units, and said it was making good progress on delivering its strategic review.

On the economic calendar, the U.S. Federal Reserve begins a two-day rate-setting meeting. Analysts believe the Fed will deliver a modest 25 basis points cut, which could signal the bank's rate-cutting campaign is over.

"We are going to have ups and downs but I'm becoming more and more of the opinion that away from the banks, the world's economy is probably in better shape than we want to give it credit for," Cantor's Buik added.

Motor insurer Admiral Group (ADML.L) was flat percent ahead of its trading update and annual general meeting.

Life insurer Resolution (RSL.L) was also unchanged on its final day in the UK's blue-chip index, with British packaging group Bunzl (BNZL.L) replacing the stock following its acquisition by unlisted rival Pearl.

But as metal prices eased, mining shares followed suit, with Xstrata (XTA.L), BHP Billiton (BLT.L) and Rio Tinto (RIO.L) falling 1.8-2.4 percent.

High oil prices and a newspaper report that British Airways (BAY.L) was planning a profit warning, sent the airliner down 1.4 percent.