Britain's FTSE erases yearly loss as BHP rallies

* FTSE 100 up 0.4 pct, outperforms regional peers

* Index erases losses for the year after three-day rise

* BHP Billiton (NYSE: BBL - news) boosted by results beat

By Francesco Canepa

LONDON, Feb 18 (Reuters) - Britain's top equity index erased its losses for the year as it rose for a third straight session on Tuesday, supported by miner BHP Billiton after strong results.

Shares in the global miner rose 1.6 percent after its first-half profit beat forecasts and the firm hinted at a share buyback in August, despite a cautious outlook on Chinese growth.

While market concerns about the Chinese economy and emerging markets remain, they have considerably eased over the past two weeks, thanks to better economic data from the world's second largest economy and a Federal Reserve pledge to keep rates low.

The FTSE 100 was up 29.54 points, or 0.4 percent, to 6,765.54 points at 1517 GMT, outperforming small falls in most other European indexes.

The index has risen in nine of the last 10 sessions, taking its total gain over that period to 5 percent, its best such run since October, and leaving it up 0.2 percent year-to-date.

It was now facing technical resistance at 6,780, a level that capped the FTSE last year.

"The fact that we had some better data over the last couple of weeks calmed some of the nerves out there and helped feed the risk appetite we've seen in European equities," said Joshua Raymond, a strategy at City Index.

"We could face some resistance at 6,780 and ... that could cause a bit of profit-taking considering that we've gone up quite quickly, but we're still hoping we'll see some bullish action in the longer term."

The FTSE, which generates a quarter of its revenues from emerging markets, lagged its more domestically focused peers during the emerging markets driven sell-off earlier this year.

Curbing gains on the FTSE on Tuesday was Intercontinental Hotels, which retreated from an all-time high after the hotel operator offered no new plans to return money to shareholders, even though it had recently sold some property.

"They sold two big assets ... but the current (share) buyback is ongoing so it was perhaps a bit naïve to expect a large capital return today," Nomura analyst Tim Barrett said.

Volume on InterContinental shares was 70 percent higher than its full-day average for the past three months. Volume on the FTSE was 25 percent lower than its own 90-day average.

The drop in InterContinental Hotels (Other OTC: ICHGF - news) was starting to lure bargain hunters into the stock as the fundamental investment case on the company was seen as intact. The shares hit an intra-day low at 1,946 pence before recovering to 1,980 pence.

"We feel that despite the delay in the cash return it is going to be a good buying opportunity (as) fundamentals remain firm," said Ed Woolfitt, head of trading at Galvan.