* FTSE 100 up 0.2 pct but on course for quarterly drop

* Babcock nearly recoups last week’s losses

* Miners extend gains on China stimulus optimism

By Tricia Wright

LONDON, March 31 (Reuters) – UK shares rose on Monday, led by Babcock after a nuclear contract win and underpinned by mining companies on hopes for stimulus measures in China. The blue-chip index was still set for its first quarterly drop since June, though.

Babcock advanced 4.6 percent in brisk trade. The engineering contractor and its U.S. peer Fluor were named preferred bidders for a 14-year, 7 billion-pound ($ 11.7 billion) contract to manage the decommissioning of Britain’s nuclear sites.

The stock’s gains almost recouped its losses last week, when Babcock announced a big rights issue to fund the acquisition of helicopter firm Avincis.

“Positivity in the stock from what I call ‘gold-plated government contracts’ (on account of both prestige and value) should extend the share price to my six-month target of at least 1,550 pence,” said Jordan Hiscott, a senior trader at Gekko Global Markets. The shares are currently trading at 1,351 pence.

Trading volume in Babcock was almost four times its 90-day daily average. Turnover for the UK benchmark as a whole was around half the daily average.

Mining (LSE: MIR.L – news) companies rose 0.9 percent. That took their rally since their March 20 low to around 6 percent.

A string of weak economic data from China has led to expectations the government will try to boost demand in the world’s largest metals consumer. The Chinese premier said last week China could act to support infrastructure investment.

But the sector retreated from an intraday peak as copper fell after hitting a two-week high earlier on Monday, The FTSE 100 index consequently slipped from an earlier two-week high to trade up 11.03 points, or 0.2 percent, at 6,626.61 points by 1422 GMT.

“A bit of a bounce in the sector … just on hopes that commodity prices will get a fillip from the Chinese stimulus – although actually metals prices haven’t bounced as much as we might have expected, which I think is why the markets are generally just tailing off,” said Matt Basi, head of sales trading at CMC Markets.

“Until we’ve got further clarity on what’s going to happen … it’s probably wise for people just to be a bit more cautious and take a bit of money off the table.”

Rio Tinto (Xetra: 855018 – news) led the miners higher with a 2.4 percent gain, as Credit Suisse (NYSE: CS – news) reiterated the stock on its “focus” list.

“Potential for shareholder returns at Rio Tinto is larger and could be sooner than any of its peer group including BHP,” analysts at Credit Suisse wrote in a note.

The FTSE 100 index was still down almost 2 percent for the year on the last day of the first quarter, set for its first quarterly fall since last June. Concern over the economic impact of tension between Russia and the West, as well as weaker data from the United States and China, hit stocks early in the year.

“If you look at the sell-off we’ve had compared to all the negative news we have, we would have seen a much worse sell-off if there wasn’t underlying strength in this market to start with,” IG (LSE: IGG.L – news) ‘s Madden said.

($ 1 = 0.6011 British Pounds) (Additional reporting by Alistair Smout; Editing by Larry King)