UPDATE 1-FTSE edges up after Yellen, US data; RBS slumps

* FTSE 100 closes up 0.2 pct

* RBS day's worst performer

* U.S. data help pare losses

* Capita among companies to report good results

By Joshua Franklin

LONDON, Feb 27 (Reuters) - Britain's top share index edgedup on Thursday, lifted by positive U.S. data and assurances fromFed chair Janet Yellen, despite a sharp sell-off in Royal Bankof Scotland and increasing tension over Ukraine.

Royal Bank of Scotland skidded 7.7 percent after itsnew chief executive outlined plans for a large-scale overhaulafter the mostly state-owned lender reported an 8.2 billionpound ($13.64 billion) loss.

Upbeat data on U.S. manufacturing goods' orders howeverhelped the blue-chip index.

"The markets have edged higher on positive data from acrossthe pond. U.S. initial jobless disappointed but continuingclaims and durable goods have helped sentiment," said AmritPanesar, senior trader at Accendo Markets.

Investors also reacted to positively to Federal ReserveChair Janet Yellen's testimony to the Senate Banking Committeeon Thursday. She said the central bank would be on alert to makesure recent signs of weakness in the U.S. economy are due tocold weather and storms, and not signals of a more fundamentalslowdown.

The FTSE 100 closed up 11.12 points, or 0.2 percent,at 6,810.27 points.

Weighing on world stocks was a report from Interfax newsagency that Russian aircraft had been put on high-alert on theUkrainian border.

"The involvement of Russia would be the bigger worry, thatit's going to lead to frosty ties with the EU and for the U.S.with Russia," said Will Hedden, sales trader at IG.

Capita was the day's top performer, with shares in theBritish outsourcing group surging 6.7 percent after it posted a14 percent rise in annual profit.

The company said it was confident about 2014 after winning588 million pounds ($978.29 million) worth of new contracts sofar this year.

Shares in the world's largest advertiser WPP weredown 3.5 percent despite reporting strong trading, with Liberumand Numis both raising concern over a hit to margins and lowermargin guidance moving forward.

"The main reason for the downgrade is that WPP has takendown its longer-term margin improvement targets," Liberum saidin a note, cutting the stock to "hold" from "buy".

"While January has started well and the share buybackprogramme has increased, this does not offset the disappointingmessage on margin improvement," it said.