Britain's FTSE boosted by BT and GKN

* FTSE 100 up 0.2 pct

* GKN (LSE: GKN.L - news) rises after confident full-year outlook

* BT Group (LSE: BT-A.L - news) up on Ofcom relief

* Housebuilders down on price target cuts

By Kit Rees

LONDON, July 26 (Reuters) - UK shares opened in positive territory on Tuesday, driven by gains in engineering firm GKN and BT, though UK housebuilders fell after a series of price target cuts.

The blue chip FTSE 100 index was up 0.2 percent at 6720.53 points by 0815 GMT, outperforming the broader European market.

Engineering firm GKN was among the top risers, up 2.4 percent after sticking to a forecast for 2016 to be another year of growth.

It (Other OTC: ITGL - news) also said that it would aim to cut costs by 30 million pounds ($39.32 million) to help boost next year's result.

"Staying on course and delivering on guidance (before FX) strikes us as pretty good going given the number of ebbs and flows across each division, although it is precisely what GKN has done for at least the last three years," Sandy Morris, equity analyst at Jefferies said in a note.

"We believe 2016 will not - as GKN guided - be a vintage year in terms of organic growth, but the things that need to happen to position GKN for good organic growth from 2017 appear to be slotting into place."

Likewise telecoms company BT Group rose 4.2 percent after British regulator Ofcom did not recommend breaking up the company.

Instead, Ofcom said that BT's network division Openreach should be run as a separate company within the telecoms group.

"Avoidance of the worst-case outcome may be a relief for investors and the underperformance of the BT share price in recent months may imply that concerns over governance at Openreach may be at least partially priced in," Polo Tang, Head of Telecom Research at UBS (LSE: 0QNR.L - news) , said in a note.

Housebuilders, however, were the biggest laggards, with Taylor Wimpey (LSE: TW.L - news) , Berkeley Group, Barratt Developments and Persimmon (Other OTC: PSMMF - news) all down between 2.3 percent to 2.5 percent after Deutsche Bank (LSE: 0H7D.L - news) cut its price target on all four stocks, citing Brexit uncertainty for a reduction in their forecasts for the sector.

Shares (Berlin: DI6.BE - news) in ITV (LSE: ITV.L - news) also fell 2.6 percent after a target price cut from Kepler Cheuvreux.

Oil major BP was down 2.4 percent after missing its quarterly profit expectations due to weak refining margins and oil prices.

The oil company also cut its 2016 investment budget to below $17 billion.

Outside of the blue chips, Virgin Money jumped over 6 percent after reporting a rise in half-year underlying pretax profit. (Editing by Jeremy Gaunt.)