* FTSE up 0.4 percent as G7 intervenes on yen
* Energy related stocks rise as Credit Suisse ups rating
* ARM as Matrix starts the chip designer as "reduce"
By David Brett
LONDON, March 18 (Reuters) - Britain's top share index extended gains on Friday from a technically oversold position as intervention by G7 countries to stabilise the yen boosted sentiment.
The FTSE 100 was up 22.02 points, or 0.4 percent, at 5,718.13. The index is down more than 4 percent in March.
The FTSE relative strength index is trading around 36, from 29 on Thursday, with London's blue-chip index having rallied 120 points, or more than 2 percent, in the last two trading days. A reading below 30 suggests a market is oversold.
The FTSE All Share Index has bounced off its 200-day moving average at around 2904, which it neared earlier this week.
Peter Dixon, economist at Commerzbank said equities markets were receiving a welcome lift after European authorities joined an international effort to help curb the strength of the Japanese yen.
"If you look at how far we have fallen in the last couple of weeks a rebound was inevitable, and the decision by the G7 has given us reason for some confidence," he said.
Energy-related stocks were among the top gainers as Credit Suisse raised energy utilities to a small "overweight" from "underweight", in a global strategy note, saying they had underperformed relative to the oil price.
The broker highlighted Centrica, up 3.2 percent, and said it stayed "overweight" on regulated utilities such as National Grid, up 4.4 percent, viewing them as cheap index-linked bond proxies and an inflation hedge.
Credit Suisse, however, reduced its weightings in cyclicals to a marginal "underweight" from "benchmark", but said among cyclicals it remained "overweight" on cheap corporate spend plays, such as software, advertising and autos.
OIL CONUNDRUM
Brent crude oil remained near multi-year highs at around $114.40 a barrel as political-related violence continued across the Arab world. BP rose 1 percent on high volumes.
Companies that service energy firms also benefited, with Petrofac rising 2.2 percent. Peer Amec added 1.5 percent, also supported by Investec Securities initiating coverage of the stock with a "buy" rating.
The troubles in the Middle East and North Africa and the ongoing nuclear crisis in Japan, however, meant investors were unlikely to rush back into equities, with some saying they still looked expensive.
"People had become over-confident; we were due a correction on valuation grounds, and the events in North Africa, Japan and Bahrain are just triggers for selling," said Charles Morris, manager of the $2.5 billion HSBC Absolute Return fund.
ARM Holdings fell 4.2 percent, with traders pointing to a note from Matrix that recommended reducing holdings of the designer of chips. Analysts also said Japanese supply problems after last week's massive earthquake there made it vulnerable.
According to Thomson Reuters data, ARM trades on more than 50 times forward earnings, compared with a sector average of around 25 times.
Clothing retailer Next shed 0.6 percent, weighed down by a note from BofA Merrill Lynch that cut its rating. (Additional reporting by Tricia Wright and Simon Falush; Editing by Will Waterman)