* FTSE 100 up 0.4 percent
* BHP Billiton firms, weighs spin-off of assets
* Babcock more than recoups last week's losses
By Tricia Wright
LONDON, April 1 UK shares kicked off the quarter on a high note, fueled by gains from miners on optimism over ongoing stimulus from China, with BHP Billiton leading the sector up as it mulled a spin-off of unloved assets.
BHP Billiton added most points to the FTSE 100 as it weighed a range of options to simplify its portfolio of assets, including a possible spin-off of unwanted businesses such as aluminium and nickel into a separate company.
"The market will welcome anything that means it's going to get rid of its worst assets, slim it down and focus on what it does best... (It) seems to be in an upward trading range. It should make twenty pounds fifty, probably in a month's time," Joe Rundle, head of trading at ETX Capital, said.
The shares rose 2.4 percent to 1,888 pence, also bolstered, along with sector peers, by expectations for stimulus from China given persistent weakness in the country's manufacturing sector.
A string of weak economic data from China has lent support to a view the government will try to boost demand in the world's largest metals consumer. The Chinese premier said last week China could act to support infrastructure investment.
Investors were also reassured by dovish comments by U.S. Federal Reserve Chair Janet Yellen, who suggested the central bank's stimulus measures would be required for some time yet.
Babcock climbed 3 percent after the London Fire Brigade named the engineering contractor as the preferred bidder on a 21-year contract to manage its vehicle fleet.
The gains, which built on a strong advance seen on Monday fueled by a nuclear contract win, saw the stock more than recoup its losses from last week when Babcock announced a big rights issue to fund the acquisition of helicopter firm Avincis.
Charles Stanley analyst Bill McNamara reckoned the stock - currently trading at 1,386 pence - will push back through 1,400 pence in the near term.
The FTSE 100 was up 26.40 points, or 0.4 percent, at 6,624.77 points by 0814 GMT, having shed 0.3 percent on Monday, leaving it down 2.2 percent for the year on the last day of the first quarter, and posting its first quarterly fall since last June.
Technical analysts were, however, relatively bullish on the index, seeing scope for it to move up towards the top end of a range it has been trapped in since late October, between around 6,400 to 6,800.
"In the short-term, a potential break above 6,655 - which marks the convergence of the 50-day moving average with a short-term bearish trend line - could see the index squeeze higher towards... 6,755 or 6,885," Fawad Razaqzada, technical analyst at FOREX.com, said. (Reporting by Tricia Wright; Editing by Tom Heneghan)