US services data, bid talk help FTSE gain 1.5 pct

By Michael Taylor

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.