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* FTSE 100 up 0.4 percent; rallies after Wednesday's dip
* Retailers lead, with Morrisons and Ocado in talks
* Home Retail gains as lifts forecasts again
By David Brett
LONDON, March 14 Retailers led a rebound on Britain's top share index early on Thursday, with Wm Morrison Supermarkets, Ocado and Home Retail all higher after strong trading updates.
By 0851 GMT, the FTSE 100 was up 26.04 points, or 0.4 percent, at 6,507.54, having shed 0.5 percent on Wednesday, and after the U.S. Dow Jones hit all-time highs, rising for the ninth consecutive session following better than expected retail sales data.
"Markets saw their one-day wobble and have got back to winning ways and once again any weakness was greeted with buying on the dips," Jawaid Afsar, sales trader at SecurEquity, said.
Despite the FTSE index being at 5-year highs and up 15.6 percent since November, technical analysts said that recent price action - the FTSE bounced convincingly off intraday lows on Wednesday - showed investors remained willing to buy back into the market on any sign of weakness.
"A clearer picture may emerge after the (quarterly options) expiry tomorrow and it looks like any correction will be shallow, the trend still is up despite the dizzy heights the markets have reached so far," SecurEquity's Afsar said.
Retailers were among Thursday's top performers.
Britain's fourth-largest supermarket Wm Morrison climbed 4.3 percent after raising its dividend by 10 percent and announcing talks with online grocer Ocado over an online food operation is to launch in 2014.
"The potential tie-up with Ocado could conceivably help Morrisons to make up some lost ground," Richard Hunter, Head of Equities at Hargreaves Lansdown Stockbrokers, said.
Ocado, which has been the talk of bid rumours involving Morrisons as is one of the most shorted stocks on the FTSE, also reported a strong rise in recent sales and jumped 9.7 percent.
Britain's biggest household goods retailer Home Retail rose 13.5 percent after it hiked its profit forecast for the second time in 2013.
Yield-hungry investors continued to snap up shares in Prudential, up 3.9 percent after the insurer ramped up its dividend by 15.9 percent on Wednesday. (Reporting by David Brett; Editing by John Stonestreet)