* FTSE 100 up 1 pct

* AstraZeneca (NYSE: AZN – news) surges on reported Pfizer (NYSE: PFE – news) bid interest

* GlaxoSmithKline (Other OTC: GLAXF – news) jumps on asset swap with Novartis

(Adds detail, quote, updates prices)

By Alistair Smout

LONDON, April 22 (Reuters) – Merger and acquisition activity

in the pharmaceutical sector drove Britain’s top share index to

a two-week high on Tuesday, putting it within sight of its peak

for 2014.

Drugmaker AstraZeneca surged 7.1 percent, with

trading volumes in the stock nearly twice their 90-day average

after the Sunday Times newspaper reported a 60 billion pound

($ 101 billion) approach from U.S. peer Pfizer.

The UK stock market had been closed since Thursday due to

the Easter holiday.

Both companies declined to comment. Analysts at Citigroup (TLO: CIT-U.TI – news)

said in a research note they expected Pfizer (TLO: PF-U.TI – news) “to push

aggressively ahead with a second approach.”

Rival drugmaker GlaxoSmithKline rose 5.5 percent

after exchanging assets with Swiss peer Novartis (Xetra: NOT.DE – news) ,

which unveiled a multi-billion dollar revamp, while the general

mood dragged rival Shire (LSE: SHP.L – news) up 4.5 percent.

“We have seen the FTSE move higher on the M&A front led by

the pharma sector. We continue to see scope for more M&A

activity not only in the pharma sector but in other sectors

also,” Atif Latif, director of trading at Guardian Stockbrokers,

said.

“Pharma has been out of favour of late given the concern

about patent expiry, the increase in generic competition, but

the selloff in biotech has allowed investors to buy back in low

valuations and M&A activity.”

The blue-chip FTSE 100 index was up 1 percent, or

69.80 points, at 6,695.05 points at 1043 GMT.

The FTSE 100 hit a peak of 6,867 points in late January, its

highest level since early 2000. It is now less than 3 percent

off that level, having recovered from a slide driven by concerns

over a slump in emerging markets economies, tensions between

Russia and Western powers over Ukraine and a selloff in

U.S.-listed biotech firms.

However, it has been stuck in a 200-point range for the last

six weeks. Tuesday’s move, led by the pharmaceutical sector,

took the index to the top end of that range but analysts were

cautious.

“We’re still in quite a wide range, and there hasn’t been

too much outside of the pharma sector to make us think that

we’ll break out of it soon,” Jeremy Batstone-Carr, analyst at

Charles Stanley (LSE: CAY.L – news) , said.

“(However), there’s nothing like a bit of M&A to excite

investors and coalesce interest in relation to the market

generally. It shouldn’t be taken as a sign of the top of the

market.”

($ 1 = 0.5951 British pounds)

(Additional reporting by Sudip Kar-Gupta; Editing by Susan

Fenton)