* FTSE 100 up 0.6 pct
* FTSE 250 up 0.3 pct
* Diageo, Shell surge after strong results
* Unilever slides after flagging "challenging" 2019(Adds analyst comments, graph, updates share prices)
By Muvija M
Jan 31 (Reuters) - London's main stock index was higher onThursday, notching up gains for a third straight session,propelled by upbeat earnings reports from heavyweights Shell andDiageo and the U.S. Federal Reserve's dovish stance on futureinterest rate hikes.
The FTSE 100 was up 0.6 percent at 0949 GMT afterhitting its highest level in nearly three weeks, while themidcap index rose 0.3 percent to its highest sinceNovember.
The blue chips were on track for their best monthlyperformance since April.
The upbeat mood across European bourses followed Asia, whereshares bounced to a four-month high after the Federal Reservepledged it will be patient with further interest rate hikes,signalling a potential end to its tightening cycle amid signs ofslowing global growth.
"We’re actually quite encouraged by this new tone in Fedlanguage, as we had been arguing for the advisability of a pauseto rate hikes even before 2018’s dreadful fourth quarter formarkets," Rick Rieder, BlackRock’s Chief Investment Officer ofGlobal Fixed Income, said.
But at home, uncertainties mounted for Britain with theEuropean Union's chief Brexit negotiator saying that time wastoo short to find an alternative to the Irish border arrangementagreed in their divorce deal, as London wants.
Topping the FTSE 100, Diageo, the world's largestspirits company, added 4 percent and was course for its biggestone-day rise in one and a half years after it reported higherhalf-year sales and announced a share buyback.
Oil major Shell, the highest valued FTSE 100 firm,was close behind after it reported a forecast-beating 36-percentsurge in 2018 profits as cost savings kicked in.
That helped oil stocks climb 2.8 percent, oncourse for their best day in three months.
Water utilities United Utilities and Severn Trentadvanced 2.8 percent and 2.5 percent respectively afterregulator Ofwat approved their five-year business plans.
Shares in telecoms giant BT and Unileverturned sour after the companies reported results.
"Commentary on uncertainties, including Brexit, leave openthe possibility of a more challenging FY19/20," wrote Jefferiesanalysts about BT.
"In 2019 we expect market conditions to remain challenging,"Unilever's new chief executive Alan Jope said.
Asset manager Standard Life Aberdeen tumbled 4.3percent after a downgrade by Morgan Stanley to "equal-weight".
RPC rose 4 percent, among top gainers on the midcapindex, after U.S.-based Berry Global said it was considering acash offer for the packaging products maker following ApolloGlobal Management's 3.3 billion pounds ($4.33 billion) deal.
"What a difference a month makes, from the doom and gloom ofDecember, January looks set to see some decent gains asinvestors look at the latest earnings numbers," said CMC Marketsanalyst Michael Hewson.
(Reporting by Muvija M, additional reporting by ShashwatAwasthi in Bengaluru; Editing by Josephine Mason and MarkPotter)
