* FTSE 100 closes up 0.2 pct at 6,778.56 points
* High oil prices help energy stocks
* Shire boosted by ongoing bid speculation
* United Utilities, Severn Trent trade ex-div
By Tricia Wright
LONDON, June 18 Oil companies lifted Britain's
blue chip share index on Wednesday as heavy fighting in Iraq
pushed crude prices towards $114 a barrel.
Royal Dutch Shell and BG Group rose 1.5
percent and 0.6 percent respectively, helping the UK oil and gas
index gain 1.4 percent to make it the top sectoral
performer in the FTSE 100.
"The market is very closely watching the escalating violence
in Iraq, a major oil producer. In the short term, higher oil
prices may benefit some oil companies, but in the longer term,
if it continues, it will result in an oil shock," said Henk
Potts, equity strategist at Barclays.
"Clearly that would be an overall negative for the economy
as higher oil prices have the potential to hurt global growth
and raise companies' input costs."
Brent crude oil rose towards $114 a barrel as Sunni
militants hit Iraq's biggest refinery, stoking concerns about
oil exports from OPEC's second-biggest producer as some firms
pulled foreign workers out.
The FTSE 100 closed up 0.2 percent, or 11.79 points,
at 6,778.56 points. The index is only up 0.4 percent this year,
but is just some 2 percent below its record high hit in late
Shire topped the blue-chip leader board, rising 3.4
as bid speculation continued to swirl around the healthcare
group. It had seen solid gains on Tuesday after sources told
Reuters it had hired investment bank Citi as an adviser,
expecting to receive takeover approaches.
In the broader market, investors avoided heavy bets ahead of
the Federal Reserve's two-day policy meeting. The U.S. central
bank is widely expected to cut another $10 billion from its
monthly bond purchases, while investors will be watching for any
comments on when the Fed would begin to raise interest rates and
its outlook for the economy.
Data released on Tuesday showed a surprisingly high reading
for U.S. inflation, which sparked speculation of a hawkish tilt
to the Fed's policy outlook.
The FTSE was also held back by United Utilities and
Severn Trent as the two companies traded without the
attraction of their latest dividend payouts.
Their shares fell by 2.8 percent and 2.1 percent
(Additional reporting by Atul Prakash; Editing by Hugh Lawson
and Susan Fenton)