By Kit Rees and Helen Reid
LONDON (Reuters) - A sustained surge in oil stocks helped Britain's top share index climb further on Tuesday to seven-week highs as pressure on defensive stocks such as utilities eased and a fifth bid from Takeda Pharmaceutical boosted drugmaker Shire .
The blue-chip FTSE 100 (FTSE) index was up 0.4 percent at 7,425.40 points by the close, while mid-caps (FTMC) tumbled 0.6 percent.
The FTSE was set for its sixth day of straight gains, its longest winning streak in nearly one year.
The energy sector was the biggest contributor to the bounce, adding 19 points to the FTSE as shares in BP (L:BP) and Royal Dutch Shell (L:RDSa) climbed 2.3 percent and 1.2 percent respectively.
Energy stocks have been buoyed by resurgent crude prices, which passed the $75/barrel mark, their highest level since late 2014 on expectations that supplies will tighten with demand strong.[O/R]
Joining oil stocks at the top of the FTSE was Shire (L:SHP), up 3.4 percent after Takeda Pharmaceutical made its fifth takeover proposal for the drugmaker, sweetening its $62 billion bid before a deadline to strike a deal expires on Wednesday.
Shire gave no details of the revised bid and said the board was considering its position.
In other deal news, the British government gave the green light to Melrose's (L:MRON) takeover of engineering firm GKN (L:GKN). The approval sent Melrose shares down 2 percent as investors braced for the 8 billion pound deal to go through.
RISING BOND YIELDS
Shares in 'bond proxy', or defensive, stocks such as consumer staples and utilities recovered somewhat despite U.S. 10-year Treasury yields breaching the psychologically significant 3 percent level.
They had come under pressure on Monday as investors became more anxious about rising bond yields, which can make these stocks' reliable dividend streams less attractive to some investors.
But Unilever (L:ULVR) shares were up 1.4 percent by the close on Tuesday, and utilities National Grid (L:NG), SSE (L:SSE) and United Utilities (L:UU) also gained.
Shares in bookmaker Paddy Power Betfair (L:PPB) brought up the rear on the FTSE with a 4.9 percent fall, while mid-cap peer William Hill (L:WMH) sank 12.7 percent and GVC Holdings (L:GVC) fell 6 percent following reports that the UK government will cut the top limit on fixed odds betting terminals (FOBTs) to 2 pounds sterling.
The falls among betting stocks helped send the FTSE 250 down 0.6 percent.
"While this is bad news for the multi-channel operators, we suspect the market may be equally concerned by the suggestion in the same article that any tax shortfall could be offset by gaming tax increases elsewhere," analysts at Davy said in a note, referring to an article in The Times.
Focus shifted on Tuesday to upcoming earnings reports, with UK banks set to be in the spotlight later this week.
"As the week now pans out, we're going to have first quarter numbers from Lloyds (L:LLOY), Barclays (L:BARC) and RBS (L:RBS) ... so if there is to be any sense of optimism coming out of the Q1 earnings season, clearly financials are going to be part of that," said Richard Hunter, head of markets at interactive investor.