* FTSE 100 up 0.5 pct
* AstraZeneca jumps as Pfizer confirms bid interest
* New US sanctions on Russia prompt choppy trade (Adds quotes, detail, updates prices)
By Alistair Smout
LONDON, April 28 (Reuters) - AstraZeneca shares surged to boost Britain's top share index on Monday, after U.S. rival Pfizer said it wanted to buy the drugmaker.
The FTSE 100 looked set to post a new 7-week closing high, despite a volatile afternoon session as investors digested new sanctions on Russia from the United States.
AstraZeneca jumped 15 percent after Pfizer confirmed on Monday it had approached the drugmaker in January and said it had contacted the company again on April 26 seeking discussions about a takeover in what would be one of the largest pharmaceuticals deals ever.
The renewed approach is the latest in a burst of deal-making and bids in the healthcare industry aimed at gaining scale or specialising in certain areas.
"AstraZeneca was conclusive in saying that the bid was too low, hence the reason we're seeing such a hefty premium being applied to Friday's prices today," said Alastair McCaig, analyst at IG, adding that it was encouraging for the market that activity in mergers and acquisitions was picking up.
AstraZeneca added about 30 points to the FTSE 100. The shares had traded 4 and a 1/2 times their 90-day daily average volume by 1413 GMT, with total turnover on the FTSE 100 less than half of its average.
Astra's share price gain raised the group's market capitalisation by roughly 7.7 billion pounds ($13 billion).
The prospect of more corporate activity in the sector also lifted Shire and GlaxoSmithKline. Shire added around 10 percent and GlaxoSmithKline about 6 percent last week.
Without further news, Astra shares were set to consolidate around current levels, extending their gains only if it looks as if a deal is going ahead, traders said.
New sanctions on Russia from the United States contributed to choppy afternoon trade. Markets initially took a hit when the sanctions were announced, fearing economic fallout from the move, but then rebounded as analysts said the details of the sanctions were less harsh than anticipated.
"It's been a long week since we had a sense of optimism that negotiations could pave the way to a solution. But these are targeted, rather than a widescale, scatter-gun mentality, which is encouraging," IG's McCaig said.
The FTSE 100 was up 32.91 points, or 0.5 percent, at 6,718.60 by 1435 GMT, with AstraZeneca's rise accounting for all of the index's gains, which set it up for a new 7-week closing high as it rallied through 6,703.
Analysts said a rebound in corporate dealmaking could offset concerns about frothy valuations for British firms and lower analyst forecasts, keeping the FTSE 100 stuck in a range for now.
"It just shows how important M&A is to keep sentiment positive given that the macro, although it's improving, is kind of priced in now," said Ian Williams, a Peel Hunt equity strategist. ($1 = 0.5948 pounds) (Additional reporting by Tricia Wright; Editing by Sonya Hepinstall)