* FTSE 100 up 1 pct
* ARM surges after posting higher profits
* Tesco hit by brokers' price target cuts
* Cautious parcel unit outlook hits Royal Mail
By Sudip Kar-Gupta
LONDON, July 22 Britain's top share index
rallied on Tuesday, lifted by technology group ARM,
which posted higher profits that beat analysts' expectations.
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 Airlines plane shot down
over eastern Ukraine last week.
The blue-chip FTSE 100 equity index was up by 1
percent, or 66.87 points, at 6,795.31 points going into the
close of the trading day.
Nevertheless, it remains 1.2 percent below its July high.
The FTSE 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 anti-Kiev rebels.
However, Intertrader chief market strategist Steve Ruffley
backed buying 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
ARM jumped 4.6 percent, making it the best-performing FTSE
stock in percentage terms, after the company - which sells
blueprints for chip designs - posted higher second quarter
"ARM is the UK's pre-eminent play on the digital economy,"
said Mirabaud Securities equity research partner Steve Clayton.
However, Tesco fell 3.5 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.
Tesco's shares had risen 1.3 percent on Monday as investors
reacted positively to the fact that CEO Philip Clarke would be
leaving after months of underperformance.
However, a degree of caution set in on Tuesday as analysts
said new CEO Dave Lewis, from Unilever, had a tough
task ahead of him in restoring the fortunes of Tesco, which has
been hit by competition from low-cost rivals.
Royal Mail also underperformed, falling 3.9 percent
after the postal company, which listed in October, said rising
competition had prompted it to cut its expectations for revenues
from its parcel deliveries business.
"The key challenge remains weakness in parcel pricing in the
UK. In our view, the company faces a considerable volume and
pricing challenge in parcels in the next 18 months," said Cantor
Fitzgerald analyst Robin Byde. He kept a "sell" rating on the
(Additional reporting by Neil Maidment and Alistair Smout;
Editing by Andrew Heavens and Susan Fenton)