* FTSE up 0.5 percent; European auctions ease debt fears
* Banks rise; UK inflation starts to fall
* BSkyB gains after rejecting News Corp offer
By David Brett
LONDON, June 15 (Reuters) - Britain's top shares were higher
by midday on Tuesday, led by a rally from banks as demand for
European government debt helped lift sentiment, with BSkyB
<BSY.L> up after an approach by News Corp <NWSA.O>.
By 1116 GMT, the FTSE 100 index <> rose 23.86 points,
or 0.5 percent, to 5,225.89, having closed up 0.7 percent on
Tuesday at its highest closing level since June 3 and notching
up a four-session winning streak.
"Equity markets have continued to trade in a fairly volatile
range over the past weeks, gyrating between their lows and
significant resistance levels at or around their 200-day moving
averages," said Michael Hewson, market analyst at CMC Markets.
Hewson said the next key level for the FTSE 100 would be
5,255.20, but added "even if it does (break through) an even
bigger obstacle lies in its way at the 200-day moving average at
5,325".
The FTSE 100 index reversed earlier losses after Spain's
Treasury raised 5.2 billion euros ($6.98 billion) at its 12 and
18-month T-bill auction on Tuesday, while Belgium raised 2.5
billion euros in a heavily oversubscribed auction, and Ireland
sold 1.5 billion euros in bonds.
These auctions helped eased initial fresh anxiety over the
euro zone debt situation after Moody's on Monday downgraded
Greece's debt to junk status.
Banks, which potentially have a large exposure to Europe's
debt crisis, rallied in volatile trade. Barclays <BARC.L>, Royal
Bank of Scotland <RBS.L> Lloyds Banking Group <LLOY.L>, HSBC
<HSBA.L> and Standard Chartered <STAN.L> added 0.1-1.8 percent.
Also helping out was news that British consumer price
inflation fell slightly more than expected in May, helped by
lower food costs, boosting hopes that inflation is on a downward
path.
Energy shares were in positive territory, largely helped by
a 1.1 percent gain for embattled BP <BP.L> as bargain hunters
moved in on a stock that has fallen 45 percent since its oil
spill in the Gulf of Mexico in mid-April.
But BP shares had wobbled after ratings agency Fitch
downgraded the oil major's debt rating.
BP's U.S. chief Lamar McKay faces accusations in Congress on
Tuesday that the energy giant caused the worst oil spill in U.S.
history with a calculated strategy to cut costs, hours before
President Barack Obama uses a televised address to defend his
handling of the disaster. []
Peer Royal Dutch Shell <RDSa.L> climbed 0.4 percent, but BG
Group <BG.L> eased back 0.2 percent.
SKY'S THE LIMIT
Pay-TV firm BSkyB <BSY.L> soared over 19 percent after it
rejected a proposal by major shareholder News Corp <NWSA.O> to
buy the rest of the company in a deal that would value BSkyB at
12.3 billion pounds ($19 billion) but said it would recommend a
higher offer. []
Elsewhere, InterContinental Hotels <IHG.L> gained 3.6
percent, rising for a fifth straight day, buoyed by target price
hikes from Morgan Stanley and Societe Generale following recent
investor days from the company and upbeat sector newsflow.
Whitbread <WTB.L> also put on 3.5 percent ahead of a trading
update from the hotel and coffee shop operator on June 22.
Tesco <TSCO.L> was 2 percent higher after the world's number
three retailer said the global economic recovery was building
and growth in its main UK market would pick up after quarterly
sales were hit by lower food price inflation and higher fuel
costs.
And ICAP <IAP.L> rose 2.4 percent as Numis Securities upped
its rating for the interdealer broker.
On the downside, Inmarsat <ISA.L> shed 4.5 percent, topping
the list of blue chip <> fallers, after BofA Merrill Lynch
downgraded its rating for the satellites operator.
(Editing by Sharon Lindores)
($1=.7453 Euro)
($1=.6823 Pound)
