* FTSE 100 index closes 0.2 percent higher
* Shell shares rise 3.7 pct after results
* Caution following fresh tension in Ukraine
By Atul Prakash
LONDON, April 30 (Reuters) - Britain’s blue chip share index set a seven-week high on Wednesday, lifted by a rally in energy stocks after solid results from Royal Dutch Shell, although tensions in Ukraine and poor U.S. growth data capped gains.
Shares in Shell gained 3.7 percent, adding the most points to the FTSE 100 index, after the Anglo-Dutch company reported a jump in first-quarter cashflows and raised its dividend.
It helped push the UK oil and gas index up 1.7 percent and set a two-year high.
“The latest results are very reassuring and highlight that the group remains on track with its strategy,” Jonathan Jackson, head of equities at Killik & Co, said, referring to Shell.
“We remain positive on the shares, which offer an attractive dividend yield, growing in real terms, and the prospect of value being unlocked from disposals.”
Barratt Developments surged 5.2 percent on a positive sector note by Deutsche Bank late on Tuesday, with the UK housebuilder featuring among its top picks, traders said.
The broader FTSE 100 index ended 0.2 percent higher at 6,780.03 points after hitting an intraday high of 6,794.88, the highest level since early March. It has gained 4 percent in two weeks, spurred by a rise in mergers and acquisition activity.
Investors avoided strong bets ahead of the outcome of a Federal Reserve policy meeting later on Wednesday, when it is likely to further trim its stimulus programme, and as data showed the U.S. economy grew at a sharply lower-than-expected pace in the first quarter. Unrest in Ukraine also weighed.
Industrial group Rolls-Royce rose 2.8 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.
“With a largely upbeat earnings season, combined with M&A activity driving capital inflows, there is a real chance markets can keep the momentum going and break higher,” Mike McCudden, head of derivatives at Interactive Investor, said.
“From a technical perspective, all major indices remain in a short-term bullish trajectory. So going against the trend at current levels is a very risky strategy indeed.”
However, analysts said a sharp rise in tension in Ukraine could derail the positive momentum, hurting global risk sentiment even though Britain’s top 100 companies make only 0.3 percent of their sales in eastern Europe.
The situation in the region remained fragile as pro-Russian separatists seized government offices in more Ukrainian towns.
“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.
On the downside, GlaxoSmithKline fell 2 percent after Britain’s biggest drugmaker reported a 10 percent drop in sales in the first quarter.
British American Tobacco slid 2 percent after announcing a 12 percent drop in quarterly revenue.
Nine blue chips, including supermarket chain Tesco traded ex-dividend, knocking a combined 6.53 points off the FTSE. Tesco shares fell 3.4 percent. (Additional reporting by Francesco Canepa and Tricia Wright; Editing by Alison Williams and Susan Fenton)