* FTSE 100 up 0.3 pct, after four days of losses
* Imperial Tobacco and BAT buoyed by merger activity
By Sudip Kar-Gupta
LONDON, July 11 Britain's top equity index
rebounded on Friday as merger activity lifted tobacco shares,
enabling the stock market to regain some poise after four days
Imperial Tobacco led the gainers with a 3 percent
rise, after saying it was in talks with Reynolds and
Lorillard to acquire certain assets and brands the two
companies may sell.
Reynolds and Lorillard are negotiating a deal that would
merge the United States' second- and third-biggest cigarette
makers, Reuters has previously reported. Shares in British
American Tobacco (BAT), which owns 42 percent of
Reynolds, also advanced 0.5 percent.
Together, Imperial Tobacco and BAT added the most points to
the FTSE 100, which was up by 0.3 percent - or 16.41 points - at
6,688.78 points by the middle of the trading day.
The two tobacco stocks also benefited on Friday from their
"defensive" characteristics of stable profits and dividends -
often favoured by investors during times of market uncertainty.
Financial markets have been unsettled by problems with
Portuguese bank Banco Espirito Santo.
"We've seen investors switch into the more defensive stocks
such as BAT," said Brown Shipley fund manager John Smith.
The FTSE 100's retreat since the start of July has pushed it
down from peaks reached in late May, which took the index close
to record highs. Traders expect it to remain stuck in its recent
trading ranges, from a high just below 6,900 points to lows
"A trading range seems the most likely outcome," said Lex
Van Dam, a hedge fund manager at Hampstead Capital.
(Additional reporting by Tricia Wright; Editing by Larry King)