FTSE adds 2.6% on writedown relief rally

By Michael Taylor

LONDON, April 1 (Reuters) - Britain's top share index ended sharply higher on Tuesday, entering the second quarter in buoyant mood as financials jumped on hopes that European bank writedowns signalled that the worst was over for the sector.

The FTSE 100 .FTSE ended up 2.6 percent, or 150.5 points, at 5,852.6.

European heavyweight banks UBS (UBSN.VX) and Deutsche Bank (DBKGn.DE) both gained after taking big hits on their risky assets -- $19 billion for UBS and $3.9 billion for Deutsche -- which gave their British counterparts a fillip.

Barclays (BARC.L), HBOS HBOS.L, Royal Bank of Scotland (RBS.L) and Alliance & Leicester ALLL.L all jumped between 6 and 8 percent.

"It's certainly been a bumper start to the month and the quarter for equities," said Jimmy Yates, a dealer at CMC Markets. "A lot of positive sentiment is coming out from the fact UBS's new credit writedown is widely hoped to be drawing a line under the recent troubles in the U.S. housing market."

In the previous session, the UK index sealed its worst quarterly performance in more than five years, declining 11.7 percent in the first three months.

"An equally bullish start on Wall Street after the release of some slightly stronger-than-expected economic data is helping lock in gains," added CMC's Yates.

Across the Atlantic, U.S. stocks rallied after Lehman Brothers LEH.N helped restore confidence in financials after it said it raised $4 billion in a convertible preferred stock offering to bolster its balance sheet.

The Institute for Supply Management said its manufacturing index for March was stronger than forecast.

The gauge rose to 48.6 in March from 48.3 in February and was closer than expected to the 50 mark, above which signals expansion.

ASTRA BOOST

Pharmaceuticals notched up strong gains, with AstraZeneca (AZN.L) advancing 6.9 percent after two brokerages hiked sales forecasts for the Anglo-Swedish group's Crestor drug, which is emerging as a potential big winner in the fiercely competitive anti-cholesterol market. [ID:nL01745321]

JPMorgan upgraded the group to "neutral" from "underweight".

GlaxoSmithKline (GSK.L) tacked on 4.6 percent.