* FTSE 100 index up 0.4 percent by midday trading

* BHP Billiton (NYSE: BBL – news) adds most points to the blue-chip index

* Mining (LSE: MIR.L – news) index tops sectoral gainers list, hits 3-wk high

By Atul Prakash

LONDON, April 1 (Reuters) – Stronger BHP Billiton on the news of a possible spin-off of unwanted businesses and expectations of more stimulus from China to prop up its economy boosted London-listed miners and the broader stock market on Tuesday.

The UK Mining index, the top sectoral gainer, rose more than 1 percent to a three-week high, helping the blue-chip FTSE 100 index to gain 0.5 percent to 6,628.13 points by 1030 GMT.

Global diversified miner BHP Billiton, up 2.6 percent, added most points to the FTSE 100 as it considered a range of options to simplify its portfolio of assets, including a possible spin-off of unwanted operations such as aluminium and nickel into a separate company.

“Aluminium and nickel have not been the most profitable parts of the business for BHP and a possible spin-off is a well received news for investors and traders alike. It seems the company has positioned itself to make iron ore, copper, coal and petrol its main business,” Amrit Panesar, senior trader at Accendo Markets, said.

Other miners also gained, with Rio Tinto (Xetra: 855018 – news) rising 1.1 percent and Vedanta Resources (Other OTC: VDNRF – news) advancing 0.8 percent on hopes of stimulus from China given persistent weakness in the country’s manufacturing sector.

A string of weak economic data from China has lent support to a view 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.

“For those investors looking to increase their exposure to more cyclical parts of the market, we believe the mining sector offers a number of attractive stocks,” Paul Kavanagh, director of market research at Killik & Co, said.

“Although uncertainty over the outlook for economic growth in China, the main buyer of many commodities, provides a near-term headwind, we believe the decisions from the Chinese government … reduce the likelihood of a sudden economic downturn,” he added.

Among other sharp movers, Aberdeen Asset Management (Other OTC: ABDNF – news) rose 6.3 percent to be the top percentage gainer on the FTSE 100 as investors welcomed cost cuts at the asset manager and a slowdown in the pace of outflows, confounding hefty bearish bets on the stock.

Markit data showed the stock was heavily “shorted” by speculative investors in recent months in anticipation of poor results.

On the downside, Scottish engineer Weir Group (Frankfurt: 42W.F – news) , down 2.4 percent, was the top loser after saying it had made an “indicative all share merger proposal” to Finnish rival Metso (Dusseldorf: VLM.DU – news) .

Charts signalled more gains, with analysts saying the FTSE 100 could move up towards the top end of a range, between 6,400 to 6,800 points, it has been trapped in since late October.

“In the short-term, a potential break above 6,655 – which marks the convergence of the 50-day moving average with a short-term bearish trend line – could see the index squeeze higher towards … 6,755 or 6,885,” Fawad Razaqzada, technical analyst at FOREX.com, said.

(Additional reporting by Tricia Wright; Editing by Alison Williams)