FTSE flat as BP gains offset banks

BP's better-than-expected results on Tuesday lifted the oil giant and other energy stocks just enough to offset weakness in miners and banks, to leave the top shares near flat in early trade.

By 9:37 a.m., the FTSE 100 was 7.49 points lower at 5,200.14 after closing down 50.83 points, or 1.0 percent, at 5,191.74.

Oil giant BP was the major driver of blue-chip gains, up 4.7 percent after it reported a halving of third-quarter profits but beat forecasts by a wide margin.

BG Group, Royal Dutch Shell and Cairn Energy added 0.1 to 1.1 percent.

"We can put this move higher down to BP" said Angus Campbell, head of sales at Capital Spreads. "It's benefiting other energy stocks, but miners and banks, which were the major drivers of the rally before are lower, so we'll have to see if the rally can be maintained."

The FTSE 100 has gained 50 percent since touching a six-year trough in March and is has risen for each of the last four months, the longest such winning streak since 2006.

With the corporate earnings season already underway in the U.S., investors focus on third-quarter results from companies like British American Tobacco and GlaxoSmithKline for fresh clues to the recovery in corporate health.

Banks were the biggest drag on the index, with Royal Bank of Scotland the worst performer, down 5.6 percent. 

Investors were unsettled after fears mounted on Monday that Lloyds Banking Group and RBS would be ordered into disposals by the European Commission after Dutch peer ING announced it would split into two and launch a 7.5 billion euro rights issue.

Lloyds was down 4.6 percent while Barclays, HSBC, Standard Chartered fell 1 to 4 percent.

Insurers were also pressured as sentiment in the financial sector soured. Prudential, Aviva and Legal & General lost 2.1 to 2.6 percent.

Heavyweight miners were weak as metal prices fell as doubts about the demand outlook resurfaced.

Rio Tinto, Xstrata, Lonmin, Anglo American, Kazakhmys and Fresnillo lost 0.6 to 2.5 percent.

Among gainers media issues saw interest. Publishing group Reed Elsevier added 3 percent as Exane BNP Paribas raised the stock to "outperform" from "neutral" and upped its stance on the European media sector to "outperform".

Investors will watch the CBI distributive trade report for October due at 11 a.m., while U.S. economic data set for release on Tuesday include the August figures for the S&P/Case-Shiller index of house prices at 1 p.m. and U.S. consumer confidence numbers for the same month at 2 p.m.

The Bank of England's quantitative easing policy will not cause a future surge in inflation, BoE policymaker Adam Posen said on Monday.