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* FTSE 100 up 0.5 percent
* Services company DCC top of blue-chip index
* Housebuilders bounce back as government report expected
* BP flounders after profit slumps
By Helen Reid
LONDON, Feb 7 (Reuters) - British shares rose on Tuesday,boosted by a weak sterling and housebuilders stocks, whileservices company DCC surged on news of a purchase fromExxonMobil.
Sterling fell to its lowest in two weeks against the dollar,contributing to gains for Britain's blue-chip FTSE index which has many dollar-earning constituents. The FTSE was up 0.6percent at 0955 GMT.
DCC rose to the top of the FTSE after the company said itwould buy a retail petrol station network of ExxonMobil's Norwegian unit, Esso Norge AS, for 2.43 billionNorwegian crowns ($293.38 million).
Shares in the Ireland-based company were up 6.7 percent andheaded for their biggest one-day gain since Nov. 2015.
Oil major BP suffered after the company reported 2016profit slumped to the lowest level in at least a decade, to$2.59 billion. BP shares were down 2.8 percent, theworst-performing FTSE stock. The FTSE 350 oil & gas index was the only sector index in negative territory.
Engine maker Rolls Royce was a top gainer, up 2.8percent. The stock figured in Citi bank's 'top calls' for theday. "Results next week should mark the inflection fromfire-fighting to looking to the future," Citi analysts wrote ina note.
Materials stocks were the top sectoral gainer. Rio Tinto, which reports earnings on Feb. 8, was a top gaineralong with peers Fresnillo and Randgold Resources. The FTSE miners benefit from a weaker pound due totheir operations abroad.
Education group Pearson, which suffered itsworst-ever daily fall on Jan. 18, was a top gainer, up 2.8percent after Morgan Stanley raised its target price on thestock to 615p from 550p.
Housebuilders Taylor Wimpey, Barratt Development and Persimmon were gaining ground, up between2.2 and 3.4 percent, after closing in negative territoryyesterday.
The government was expected to publish details of a newhousing strategy on Tuesday.
The mid-cap FTSE 250 index outperformed theblue-chip index, up 0.8 percent with workwear and hygienecompany Berendsen leading the gains, up 5.4 percentafter RBC analysts upgraded the stock to "outperform" from"sector perform", saying the European business was in goodshape.
The small-cap index was up 0.2 percent,underperforming its peers as energy stocks weighed.
Premier Oil was the top faller, down 5.9 percentafter a downgrade from "buy" to "hold" from Deutsche Bankanalysts, citing underperformance from the company's Solan fieldin the North Sea. (Reporting by Helen Reid; Editing by Raissa Kasolowsky)