* FTSE 100 up 0.3 pct, outperforms other Europe indexes
* Deal hopes buoy Smith & Nephew, Weir - traders
* Results disappointment hits Kingfisher shares
By Atul Prakash and Lionel Laurent
LONDON, May 29 Britain's top share index edged
higher to trade near a 14-year high on Thursday, with takeover
speculation surrounding companies such as Smith & Nephew and
Weir Group lifting investors' appetite for riskier assets.
The FTSE 100 index was 0.3 percent higher at 1021
GMT, outperforming slightly lower benchmark indexes in France,
Germany, Italy and Spain. Trading volumes were just 14 percent
of the index's 90-day daily average because of a public holiday
in many European countries.
The benchmark index hovered just below the 14-year high
scaled earlier this month and was just less than 2 percent away
from a record peak set in 1999.
Medical-devices manufacturer Smith & Nephew was the
top performer in the FTSE 100 index, up 4.2 percent,
extending Wednesday's gains after a press report of a planned
takeover bid from U.S. rival Stryker.
Although Stryker denied it was planning a bid, traders said
the return of takeover speculation would continue to support S&N
shares in particular and the broader market in general.
"The improving economic backdrop and the pick up in business
confidence are likely to be supportive for a pickup in M&A
activity," said Robert Parkes, equity strategist at HSBC.
"In addition, valuations are not stretched and there appears
to be an element of pent up demand as a result of the depressed
level of deal activity we have seen over the last few years."
Engineering company Weir Group was also a strong
gainer, up 1.6 percent, a day after it abandoned efforts to
acquire rival Metso. The Finnish company had rejected
Weir's second, improved takeover bid.
Bankers have said a failure to merge with Metso could make
Weir, already frequently the subject of takeover speculation, a
target for big players such as General Electric or
Honeywell that are keen to access the Glasgow-based
company's lucrative position in U.S. shale.
Merger news also spread to Man Group and helped the
hedge-fund manager to gain 5 percent after it confirmed it was
in talks to buy U.S. asset manager Numeric Holdings.
But some disappointment on the earnings front countered the
M&A froth in the market.
Kingfisher, Europe's biggest home improvement
retailer, was down 5.1 percent even though the group reported a
20 percent rise in first quarter retail profit and said it would
pay a 100 million pound ($167 million) special dividend.
"(Results were) marginally behind market and our
expectations because of the margin impact to UK profits and a
weaker than expected performance in France and China," Cantor
Fitzgerald analysts wrote in a note to clients.
Water company Severn Trent, meanwhile, reported a 7
percent rise in annual underlying pre-tax profit to 269.1
million pounds ($449.6 million), beating the analyst consensus.
The water supplier also said it was paying a dividend of 80.4
pence for the 2013/14 financial year, a 6 percent rise.
Severn Trent shares were up 0.5 percent.
(Editing by Catherine Evans)