FTSE 100 edges up powered by Rolls Royce

* Rolls Royce (LSE: RR.L - news) up 11.5 pct after results

* Paddy Power (EUREX: 27913021.EX - news) tumbles on disappointing guidance

* WPP (Frankfurt: A1J2BZ - news) hit by report P&G cutting ad agency spending (Updates with details, closing prices)

By Helen Reid and Danilo Masoni

LONDON, March 7 (Reuters) - British stocks rose for a third straight session on Wednesday, although gains were tempered by the resignation of U.S. economic advisor Gary Cohn, which rekindled worries the U.S. administration was shifting towards protectionism.

The FTSE 100 ended up 0.16 percent at 7,157.84 points, as a rally in engine maker Rolls Royce and gains among industrials more than offset weakness among commodity stocks.

"Whilst the rhetoric has clearly increased in recent days, particularly with the timing of Gary Cohn's departure, the key tests are whether Donald Trump proceeds to sign this order but also what other nations do in response," said Edward Park, investment director at Brooks Macdonald (LSE: BRK.L - news) in London.

Trade fears caused metals prices to slip, driving miners Glencore (Frankfurt: 8GC.F - news) , Anglo American (LSE: AAL.L - news) , BHP Billiton (NYSE: BBL - news) and Rio Tinto (Hanover: CRA1.HA - news) down 0.1 to 1.6 percent.

Oil prices also tumbled, sending oil majors BP and Royal Dutch Shell (LSE: 0LN9.L - news) down 0.3 percent and 0.7 percent respectively.

Rolls Royce shares charged ahead, up 11.5 1 percent after its turnaround plan boosted profit ahead of expectations.

The sharp rise in share price could be down to investors unwinding short positions in the stock, traders said.

Astec Analytics data showed the cost to borrow Rolls Royce shares has risen over the past month, indicating increased interest in shorting the stock leading up to these results.

The FTSE banking index edged up 0.1 percent, as the release of draft guidelines for a Brexit trade deal showed the EU would only offer financial services firms in London a limited ability to sell many of their services to European companies.

Just Eat (Frankfurt: A1100K - news) shares recovered slightly from the previous day's results-driven losses, up 3.2 percent.

Paddy Power Betfair (Other OTC: PDYPF - news) shares fell 3.4 percent, the second worst-performance on the FTSE, after reporting full-year results whose lower guidance disappointed investors.

"Increased investment in brand and international expansion is likely to equate to a reduction in our 2018 EBITDA forecast of circa 20 million pounds, or 4 percent," wrote Davy Research analysts.

Advertising agency WPP was the biggest decliner, down 3.9 percent. U.S. consumer goods giant Procter & Gamble (Swiss: PG-USD.SW - news) was reported to be cutting ad agency spending by $1.25 billion over the next three years, the latest blow to the agency model .

French ad agency Publicis (Paris: FR0000130577 - news) fell 1.9 percent to the bottom of the CAC 40.

Hill & Smith (Stuttgart: 7HL.SG - news) shares jumped 4.9 percent after the infrastructure products maker reported record revenue and profits in its full-year results.

"The outlook is generally positive across the Group, with any progress on a Trump infrastructure plan likely to help sentiment," N+1 Singer analysts wrote, adding there may also be potential for M&A.

Overall, analysts have been revising earnings lower for the FTSE 100 in recent weeks as the index struggles at 14-month lows.

(Reporting by Helen Reid and Danilo Masoni; editing by Larry King)