US services data, bid talk help FTSE gain 1.5 pct

LONDON, March 5 (Reuters) - Britain's leading share index rose 1.5 percent on Wednesday, lifted by bid talk around insurers and property firm Liberty International LII.L, and a surprise fillip from U.S. services data.

The FTSE 100 .FTSE index added 85.8 points to close at 5,853.5, breaking a five-day losing streak.

Other European shares also ended higher, mirroring a trend in U.S. stock markets after a better-than-expected reading for a gauge of U.S. service sector activity. See [ID:nWEN4340]

"Wall Street has been generally impressed with the economic data as this is heaping on the pressure for the Fed to effect another rate cut later in the month which will further boost the popularity of stocks," said Jimmy Yates, a trader at CMC Markets.

The UK's blue-chip index has now fallen over 9 percent this year on fears of a U.S. recession and further credit-related writedowns by financial institutions.

Among shares, talk of a rescue deal for ailing U.S. bond insurer Ambac Financial Group ABK.N boosted insurers.

Prudential (PRU.L) was 6.8 percent higher after shareholders in China's Ping An Insurance (2318.HK) (601318.SS) approved a plan to raise about $17 billion, prompting fresh speculation it could take a stake in a European insurer.

Aviva (AV.L) gained 3.8 percent, Old Mutual (OML.L) added 3.5 percent and Legal & General (LGEN.L) was up 4.1 percent.

But Liberty International LII.L jumped 9.2 percent to top the FTSE 100 leaderboard after the Independent newspaper said the property firm was in talks with a major rival to form the world's largest shopping mall group.

The newspaper said Australia's Westfield Group (WDC.AX) and Singapore's GIC Real Estate had been mooted as potential suitors. Liberty International declined to comment.

Rivals Hammerson (HMSO.L), British Land (BLND.L), and Land Securities (LAND.L) also rose. "While today's rally is a welcome bit of relief after the steady decline we have seen from the 6,100 level on the FTSE, many are worried that it could turn out to be nothing but a dead cat bounce," said Tim Hughes, head of sales trading at IG Index.

"It has been a good day so far for the market, but it still has not managed to break above the highs set briefly yesterday."

Elsewhere oil shares gained as U.S. crude CLc1 climbed above $103 a barrel after OPEC left its output unchanged, as expected, despite U.S. calls for action to reduce crude prices.

BP (BP.L) tacked on 2.1 percent, while Royal Dutch Shell (RDSa.L) added 2.2 percent.

EX-DIVIDEND DRAGS

Banks were mixed, with Barclays (BARC.L), Royal Bank of Scotland (RBS.L) and Lloyds TSB (LLOY.L) all down after going ex-dividend.

HBOS HBOS.L, however, was up 5.7 percent after ABN AMRO upgraded Britain's biggest mortgage lender to "hold" from "sell". Within the sector, Alliance & Leicester ALLL.L gained 6 percent and HSBC (HSBA.L) rose 2.5 percent.

British American Tobacco (BATS.L), Persimmon (PSN.L), TUI Travel (TT.L) and British Energy BGY.L were also down, trading ex-dividend.

In other individual stocks, British drugmaker GlaxoSmithKline (GSK.L) slipped 2.6 percent after U.S. health officials said they had requested more information from GSK and other makers of asthma drugs to further evaluate the safety of the medicines.

British Airways BAY.L climbed 5.8 percent after it said passenger traffic had risen 5.3 percent in February, driven by a 15.1 percent improvement in business and first-class. The airliner is due to hold an investor day on Thursday.

British broadcaster ITV (ITV.L) gained 1.4 percent after it said net advertising revenues for its family of channels was expected to be up almost 2 percent in the first quarter of 2008, It also reported 2007 results broadly in line with expectations.

(Additional reporting by Dominic Lau and Rebekah Curtis) (Reporting by Michael Taylor; Editing by Richard Hubbard)