FTSE up; gains in Unilever, BP offset rate nerves

* FTSE 100 up 0.5 pct

* Unilever jumps on new CEO appointment

* BP up on hopes for TNK agreement

* Banks weak awaiting interest rate news

By Jon Hopkins

LONDON, Sept 4 (Reuters) - Britain's top share index was 0.5 percent higher early on Thursday, with nervousness on the UK economy ahead of the Bank of England's interest rate verdict offset by gains from Unilever (ULVR.L: Quote, Profile, Research, Stock Buzz) and BP (BP.L: Quote, Profile, Research, Stock Buzz).

At 0807GMT, the FTSE 100 .FTSE was up 27.3 points at 5,527.0, rallying after Wednesday's 121 points slide.

David Buik of Cantor Index said the FTSE 100 opening advance was a "nice surprise" albeit driven by just the two stories for BP and Unilever.

"But otherwise the market overall remains fairly neutral" Buik said, "with oil stocks pausing for breath as crude prices await the next news on Hurricane's Hanna and Ike".

Buik added the London market is in a "thoroughly nervous arena at the moment, with a high degree of uncertainty and traders only able to will it along at present ahead of the UK rate decision and Friday's U.S. non-farm payrolls."

Unilever added 6 percent after the Anglo-Dutch consumer goods group named Paul Polman, outgoing head of the Americas at Swiss food group Nestle SA (NESN.VX: Quote, Profile, Research, Stock Buzz), as its new chief executive to replace Patrick Cescau.

BP gained 2 percent as the oil major is close to a deal with its Russian oligarch co-owners of TNK-BP that would see board changes at the Russian company, an industry source said. [ID:nL489883]

One commentator said "this not just a BP-TNK spat, it could be the start of a recovery in the UK's current dreadful relationship with Russia."

Oil prices CLc1, meanwhile, were little changed near $109 a barrel as traders weighed concerns over slowing demand from major consumer countries against further hurricane threats to the U.S. oil sector.

Other oil majors ticked higher as crude paused for breath, with BG Group (BG.L: Quote, Profile, Research, Stock Buzz) up 1.4 percent, rallying after Wednesday's sharp fall, and Tullow Oil (TLW.L: Quote, Profile, Research, Stock Buzz) ahead 0.6 percent.

Miners also recovered after recent falls, helped by the pause in the recent decline in oil and metal prices.

Kazakhmys (KAZ.L: Quote, Profile, Research, Stock Buzz) stood out, up 2.3 percent. The government of Kazakhstan has proposed to set mineral extraction tax rates for oil producers at 7-20 percent of crude's market value from 2011, with higher rates applied to larger producers, according to a draft law.

Away from commodities, Friends Provident (FP.L: Quote, Profile, Research, Stock Buzz) took on 2.6 percent on reports Clive Cowdery, the insurance enterpreneur, is studying the group as a possible break-up target, amid increasing concern that Friends' own plans to dismantle itself have run adrift, the Financial Times said.

A spokesman for Cowdery said: "There is no wish list. It would be wrong to think that any one company is being singled out."

Whitbread (WTB.L: Quote, Profile, Research, Stock Buzz) added 3.8 percent after Britain's largest hotel and restaurants operator said like-for-like sales rose 7 percent in the 24 weeks to Aug. 14, boosted by a strong performance from Premier Inn.

BROKER COMMENT SEES CAPITAL GOODS ISSUES DIVERGE

Invensys (ISYS.L: Quote, Profile, Research, Stock Buzz) gained 1.8 percent after JPMorgan upgraded its rating to "neutral" from "underweight" in a review of the European Capital goods sector.

Smiths Group (SMIN.L: Quote, Profile, Research, Stock Buzz), however, was the biggest FTSE 100 faller, down 2.3 percent after JPMorgan cut its rating for the engineer to "underweight" from "neutral" in the same review.

Also on the downside, Marks & Spencer (MKS.L: Quote, Profile, Research, Stock Buzz) shares shed 1.3 percent on press reports the GMB union plans to launch a series of protests against the retailer after it sacked a member of staff for gross misconduct on Wednesday.

Banking issues were also under pressure again amid ongoing worries over the state of the UK economy ahead of Thursday's interest rate decisions due at 1100 GMT.

HBOS (HBOS.L: Quote, Profile, Research, Stock Buzz), Lloyds TSB (LLOY.L: Quote, Profile, Research, Stock Buzz), and HBOS (HSBA.L: Quote, Profile, Research, Stock Buzz) were down between 0.9 and 1.4 percent. (Editing by Chris Wickham)