By Francesco Canepa and Sudip Kar-Gupta
LONDON (Reuters) - Britain's top share index bounced back on Wednesday from a two-week low the day before as acquisitions boosted Imperial Tobacco (L:IMT), cement maker CRH (L:CRH) and International Consolidated Airlines Group (L:ICAG).
Imperial Tobacco rose 3.3 percent to the top of the FTSE 100 (FTSE) as traders welcomed acquisition plans that would increase its market share.
Shares in CRH rose 2.6 percent on news that it was set to buy assets from rival Holcim (VX:HOLN) and Lafarge (PA:LAFP).
British Airways owner IAG was up 1.4 percent after the Irish government cleared the way for it to bid for Aer Lingus (I:AERL).
The blue-chip FTSE 100 index (FTSE) had advanced 0.6 percent to 6,992.50 points by 1344 GMT, recouping about half its fall in the previous session.
The index is up around 6 percent since the start of 2015 but has struggled to make headway since touching a record high last month. The corporate takeover activity should help, said Toby Campbell-Gray, head of trading at Tavira Securities.
"The fact that there is this M&A (merger and acquisitions) activity will underpin this market," Campbell-Gray said.
Queen Elizabeth said on Wednesday the government would pass a law paving the way for a referendum on whether Britain would remain a member of the European Union. The vote is considered a risk for the market.
"The referendum announcement was widely expected but, its importance should not be underestimated," said Peter Cameron, assistant fund manager at Ecclesiastical Investment Management.
"If the polls are close as the campaigns get underway, then the uncertainty leading up to polling day could lead to all manner of market volatility."
Among other movers, Lloyd's of London insurers Beazley (L:BEZG) and Hiscox (L:HSX) rallied after JPMorgan (NYSE:JPM) analysts named the pair their top picks in the sector and upgraded them to "overweight" from "neutral".
Banknotes printer De La Rue (L:DLAR) fell 8.9 percent to a four-month low after reporting a 22 percent drop in full-year underlying operating profit.