Britain's FTSE boosted by earnings ahead of election

* FTSE 100 up 0.4 percent

* Imperial Tobacco (LSE: IMT.L - news) lifts sector with results

* Sainsbury falls as price war continues

* Last day of campaigning before vote

By Alistair Smout

GLASGOW, May 6 (Reuters) - Britain's top share index edged higher on Wednesday, boosted by reassuring results which lifted the tobacco and engineering sectors, although activity was muted ahead of Thursday's national elections.

Imperial Tobacco Group rose 1.8 percent after it stood by its outlook for the remainder of the year, despite reporting a 5 percent decline in underlying tobacco sales volume in the first half of its fiscal year.

Peer British American Tobacco rose 0.6 percent after Imperial Tobacco's results. The reassuring update from Imperial lifted sentiment towards the sector, which had been dented following BAT's own results that analysts described as "disappointing".

Imperial Tobacco was the top riser on Britain's blue-chip FTSE 100, which was up 26.43 points, or 0.4 percent at 6,954.01 by 0756 GMT.

Among other reassuring updates, British engineering company GKN (LSE: GKN.L - news) rose 1.3 percent after it reported a 1 percent rise in organic sales and said again it expected to grow this year.

Insurer Legal & General rose 1 percent after posting record quarterly cash generation, though inflows to its asset management arm and sales of annuity pension products dropped compared with a year earlier.

Not all reports were so well received. CRH (NYSE: CRH - news) and Sage dropped over 2 percent after their latest updates.

Grocer J. Sainsbury was also in negative territory, down 1.3 percent despite results ahead of forecast, after it posted its first annual underlying profit fall since 2005.

The supermarket has been hurt by an industry price war that shows no sign of abating.

"While there remains the on-going pressure on Sainsbury's dividend from the threat of Tesco (Xetra: 852647 - news) resetting pricing to recover some of its lost market share, these results show that Sainsbury's is in a better position to defend its market share," analysts at Cantor said in a note.

Many traders were focussed on Thursday's general election, as campaigning in Britain's most unpredictable election in a generation entered its final day on Wednesday.

The two main parties are level in most polls and neither is on track to command a majority in the parliament of the world's fifth largest economy.

Stock market reaction has been muted. While specific sectors at risk of further regulation, such as utilities, have underperformed this year, domestically exposed stocks have actually outperformed the internationally oriented FTSE 100. http://link.reuters.com/gef44w

While volatility, a crude gauge of investor fear, ticked 1.3 percent higher on Wednesday, it remains down nearly a quarter from January.

Analysts said that uncertainty around the election may keep investors on the sidelines for the next few weeks, however, as talks to form a new government begin.

"It's easy to see how this could mark the start of several downbeat sessions as the market attempts to predict how matters will evolve between now and the start of next week," Tony Cross, market analyst at Trustnet Direct, said. (Reporting by Alistair Smout; Editing by Dominic Evans)