* FTSE 100 index rises 0.1 percent
* Royal Mail slips after results
By Atul Prakash
LONDON, May 22 Britain's top share index edged
higher by midday on Thursday as corporate dealmaking hopes
bolstered tobacco stocks and encouraging data from China
The FTSE 100 index was up 0.1 percent at 6,827.42
points by 1106 GMT, trading about 1 percent shy of the record
high of 6,950.60 points it hit in December 1999.
Deal-making activity again gave the market a fillip, with
British American Tobacco helping the FTSE 100 on news
it could back a potential merger between Reynolds American
"The environment for M&A is quite positive at the moment as
uncertainties are diminishing and confidence of companies CEOs
is rising. We are also seeing an improvement in economic
activity," James Butterfill, global equity strategist at Coutts,
"It's quite likely that M&A activities will remain robust
and continue to provide support to the stock market."
Tobacco stocks added the most points to the index. British
American Tobacco rose 2.2 percent and Imperial Tobacco
was 1.5 percent higher.
The news, which follows a burst of deal-making and bids in
recent weeks, gave strength to a view that the FTSE 100 index
will hit record highs in the near term.
Miners, fuelled by signs of stabilisation in top metals
consumer China's wobbly economy, also propped up the FTSE 100.
The country's factory sector turned in its best performance in
five months in May, a private survey showed.
The UK mining index was up 0.9 percent, helped
by a 2 percent gain in Antofagasta and a 1.1 percent
rise in Rio Tinto.
Bucking the trend, recently privatised Royal Mail
fell 7.6 percent to 541.5 pence, the biggest FTSE 100 faller,
after it warned on competition as it reported a rise in profits.
Jordan Hiscott, senior trader at ayondo markets, said with
the shares having recently been at the upper end of their recent
range, and some 70 percent above the 330 pence flotation price,
the figures would have needed to impress to drive further gains.
"This morning's release of the headline figure for the full
year pre-tax profit, coming in at 363 million pounds ($613
million), instead of the expected 400 million shows increasing
challenges in the face of competition."
AstraZeneca fell 2.3 percent on continued
uncertainty over whether a $118 billion takeover bid by Pfizer
might be revived, following gains over more than 2
percent on Wednesday.
(Additional reporting by Tricia Wright; Editing by John