* FTSE 100 up 0.4 pct on the day, 2.6 pct for the week
* Vodafone buoyed by bid speculation when VZW deal completed
* Analysts reckon index will hit a record high soon
By Joshua Franklin
LONDON, Feb 21 (Reuters) - Britain’s benchmark share index rose on Friday and posted its steepest weekly gain in seven months, as bid speculation around index heavyweight Vodafone led the market higher.
Mobile operator Vodafone rose 3 percent to 236.50 pence after both BofA Merrill Lynch and UBS called it a potential bid target once it sells its stake in U.S. mobile phone company Verizon Wireless.
Speculation about a takeover has been going on for several months, however, and some doubted one was likely, although they still thought Vodafone was a stock worth holding.
“We don’t rate the bid prospects as high, but we still think there’s value in Vodafone,” said SVM Asset Management managing director Colin McLean.
Vodafone added the most points to the FTSE, and traders said the payout to shareholders from the Verizon deal should boost the broader UK stock market in the coming weeks.
“Obviously, the return of cash is going to provide some stimulus to the market,” said Cavendish Asset Management fund manager Paul Mumford.
The FTSE closed up 25.07 points, or 0.4 percent, at 6,838.06 points, for a gain of almost 7 percent from an early February low. That helped the blue-chip index to a weekly advance of 2.6 percent, its biggest since July last year.
“The market is reasserting its strength, and I am inclined to follow it,” said Valerie Gastaldy, head of technical analysis firm Day-By-Day, adding that the FTSE should soon be heading to its all-time high of around 6,950 points.
Shares in housebuilder Persimmon gained 1.9 percent, as JP Morgan analysts tipped the sector to continue to benefit from a pick-up in the UK housebuilding industry.
Expectations of new contract wins helped ARM Holdings push higher in afternoon trading. Shares in the British chip designer finished up 2.4 percent at 970 pence, its highest closing price since the end of January.
Aerospace group BAE Systems also rose 2.7 percent, recovering slightly after an 8.3 percent fall in the previous session when it warned of a drop in earnings this year.
The FTSE, which rose 14.4 percent in 2013 to post its best annual gain since 2009, is up 1.3 percent since the start of 2014.