By Danilo Masoni
MILAN (Reuters) - A strong update from BP helped the UK's top share index edge up in morning trade on Tuesday, offsetting disappointing results from heavyweight Reckitt Benckiser and outperforming European equities.
BP <BP.L> shares rose more than 3 percent, on track for their best daily performance since May, after quarterly profits at the oil major reached a five-year high, boosted by stronger oil prices and as production rose thanks to new fields.
"We're a bit cautious to use the words 'blow out' when talking about BP, but today's results are just that," said Bernstein analysts said in a note.
"With gearing nudging down and execution on track, the first three quarters are the start of a new positive trend for BP," they added, affirming their outperform rating on the stock.
The energy sector provided the biggest boost to the FTSE 100 <.FTSE>, lifting it 0.1 percent by 1002 GMT, but gains were curbed by a disappointing update from Reckitt Benckiser <RB.L>.
The re-emergence of U.S.-China trade tensions also appeared to dampen sentiment as investors remained cautious despite U.S. President Trump saying he expected a "great deal" with China.
"There still remains an underlying concern that the U.S. may well widen the scope of its tariffs to include the remaining $257 billion of Chinese goods," CMC analyst Michael Hewson said.
Reckitt shares fell 4.8 percent to a three-month low after the consumer goods maker reported a smaller-than-expected rise in underlying quarterly sales on Tuesday due to a manufacturing disruption at a European baby formula factory.
Investec downgraded the stock to sell, highlighting worries over margin pressure stemming from the former Mead business as well as the slowing Chinese milk formula market.
Shares in Ocado <OCDO.L> rose six percent after the online grocer agreed on terms of the delivery deal it struck with U.S. supermarket chain Kroger Co <KR.N> in May.
BUDGET MOVERS
Elsewhere the focus was on stocks moving in reaction to the UK budget announcement on Monday.
"The budget was more interesting than many had expected and the improving public finances allowed a more generous approach, which should be helpful to many of the companies in our coverage," said Liberum analysts.
Gambling stock Paddy Power Betfair <PPB.I> was down 1.7 percent after Chancellor Philip Hammond announced plans to hike remote gaming duties.
Packaging companies - DS Smith <SMDS.L> and RPC <RES.N> - were lower after he pledged to impose a new tax on the manufacture and import of some plastic packaging, in a crackdown on single-use plastics. Food delivery group Just Eat <JE.L> dropped 1.9 percent.
Plans to boost roads and railway spending lifted road maintenance firm Kier <KIE.L> 2.4 percent and engineering firm Costain <COSG.L> by 1.3 percent, while infrastructure company Balfour Beatty <BALF.L> eased 0.2 percent.
ADVERTISEMENTLiberum said the extra funding for high speed broadband in rural areas was another positive for Kier, while the demise of privately financed initiatives could be read negatively for Balfour.
Aero-defence group BAE Systems <BAES.L> fell 1 percent. Traders mentioned deteriorating relations between the UK/Europe and Saudi Arabia, and said more was expected from the budget, which envisages a 1 billion pound increase for defence spending.
UK housebuilders were also in focus after an extension of the Help-to-Buy scheme to 2023 provided some fresh relief to the battered sector.
Stocks with the largest exposure to the scheme such as Persimmon <PSN.L> and Taylor Wimpey <TW.L> both rose more than 0.5 percent, while Redrow <RDW.L> and Bellway <BWY.L> eased.
ADVERTISEMENT(Reporting by Danilo Masoni; Editing by Jon Boyle)
