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* FTSE 100 up 0.5 percent
* TUI Travel up as German firm says merger plans on track
* British Land up on Bank of America Merrill Lynch upgrade
By Tricia Wright
LONDON, Aug 14 (Reuters) - Britain's top equity index advanced on Thursday, bolstered by hopes of an easing of the crisis in Ukraine as well as expectations for a continuation of ultra-loose monetary policy.
TUI Travel led the gainers with a 3.6 percent rise as TUI AG's chief executive said the German company's plans for a merger with the London-listed unit were on track.
Trading volume in the stock was strong, at 112 percent of its 90-day daily average against around 30 percent seen on the UK benchmark.
UK blue-chips extended their gains following what were seen as dovish comments from Russian President Vladimir Putin on Ukraine, where pro-Moscow separatists are fighting Ukrainian government forces.
In a speech to parliamentarians in Crimea, Putin said: "We will do everything in our power so that this conflict is ended as soon as possible, so that the blood can stop flowing in Ukraine." He added that Russia did not need conflict with the outside world.
The news, which helped soothe fears of an escalation of the Ukrainian crisis and tensions between the West and Moscow, was met by investors betting that the continuation of loose monetary policies will help bolster equities.
The German economy suffered a surprise contraction, its first in more than a year, in the three months to June and France slashed its growth forecasts for this year and the next after its economy failed to grow in the second quarter.
The downbeat data clouded the macro economic picture in the euro zone, but it was also seen shortening the odds of a move by the European Central Bank to shore up the economy via an asset-purchase programme, which would drive up share prices.
The poor economic data from the euro zone's two largest economies followed weak UK wage growth data on Wednesday which prompted the market to push back its expectations for when the Bank of England would lift interest rates.
"Clearly Putin's comments have helped in de-escalating the situation, but as a reaction to the poor economic data we've been seeing - that's turned out to be quite positive for equities," Richard Hunter, head of equities at Hargreaves Lansdown, said.
The blue-chip FTSE 100 index was up 36 points or 0.54 percent, at 6,692.77 points by 1203 GMT.
Property company British Land notched up good gains, ahead 1.77 percent, after Bank of America Merrill Lynch raised its rating on the stock to "buy" from "neutral". (Additional reporting by Sudip Kar-Gupta; Editing by Mark Trevelyan)