* FTSE 100 up 0.5 pct, rebounding from previous session’s losses

* Tullow Oil (LSE: TLW.L – news) lifted by bid speculation

By Sudip Kar-Gupta

LONDON, Jan 10 (Reuters) – Britain’s top share index rose on Friday, rebounding from losses in the previous session as bid speculation boosted Tullow Oil.

The blue-chip FTSE 100 index rose 0.5 percent, or 31.39 points, to 6,722.73 points in early trading.

The FTSE, which fell 0.5 percent on Thursday, rose 14.4 percent in 2013 to post its best annual gain since 2009.

The UK stock market has been boosted by signs of a gradual recovery in the British economy, as well as a pick-up in mergers and acquisitions.

Fresh evidence that 2014 may see more takeover deals emerged on Friday after Tullow Oil rose 3.4 percent to top the FTSE 100 leaderboard on speculation that Norway’s Statoil (Xetra: DNQ.DE – news) may be eying it as a bid target.

“Whenever you see some M&A in the market, you have to buy it,” said Toby Campbell-Gray, head of trading at Tavira Securities.

Traders were awaiting publication of U.S. non-farm payrolls employment data, due out at 1330 GMT.

A Reuters survey of economists this week forecast that non-farm payrolls probably rose by 196,000 last month, slightly below November’s 203,000 gain, but a touch above the monthly average for the three months through November.

Hantec Markets analyst Richard Perry said it would be a positive sign for the equity market if the FTSE held above 6,700 after the U.S. employment data.

McLaren Securities managing director Terry Torrison said investors should still look to buy the FTSE on any pullback, as he felt the longer-term backdrop of a recovering economy and low interest rates was a positive one.

“January is usually a good month for the market. So far we’ve trodden water but I think next week will be a better week,” he said.