FTSE reaches one-week high as energy shares rally

By Atul Prakash LONDON (Reuters) - FTSE 100 rose for a third straight day on Thursday, with energy shares leading the way as oil prices gained and Royal Dutch Shell rallied after it announced jobs and spending cuts. InterContinental Hotels climbed 4.8 percent after the Financial Times reported that it had held talks with rival Starwood Hotels on a deal. The FTSE 100 index closed 0.6 percent higher at 6,668.87 points after touching a one-week high of 6,697.40 points earlier in the session. The UK Oil and Gas index rose 3.1 percent, the biggest gain by a sector, after oil prices rose. U.S. crude and gasoline stocks declined more than expected and U.S. oil production fell. Royal Dutch Shell led the sector higher, rising nearly 5 percent after the company said it would axe 6,500 jobs this year and step up spending cuts. It plans to increase asset disposals to $50 billion between 2014 and 2018 as it pushes ahead with its proposed $70 billion acquisition of BG Group. Shares in BG Group jumped about 4 percent. "Shell's move of cutting jobs and reducing capex has pleased investors as it's a good way of maintaining a strong dividend culture," Jawaid Afsar, senior trader at Securequity, said. "Sentiment has also improved as its integration with BG is also going well." The broader market also got some support from earnings reports. Rolls-Royce rose 2.6 percent despite reporting a 32 percent drop in half-year profits. The results were slightly better than expected after the engine maker slashed its forecasts three times in the past nine months. On the downside, engineering and support services firm Babcock dropped nearly 5 percent, the biggest decline in the FTSE 100 index, with revenue from the defence and security division coming in lower in the first half of the year. BT Group, Britain's broadband market leader, fell 1.2 percent despite posting first-quarter revenue and core earnings in line with forecasts. "Results were in line with expectations but Global Services performance was disappointing despite all the cost cutting. Broadband disclosure was also slightly weaker than expected," Brenda Kelly, analyst at London Capital Group, said. (Additional reporting by Liisa Tuhkanen in Helsinki and Sudip Kar-Gupta and Tricia Wright in London; Editing by Larry King)