* FTSE 100 down 0.2 percent, still near two-week high

* ABF surges after posting higher profits

* Bid speculation lifts AstraZeneca (NYSE: AZN – news) for second day

* Ex-divs knock 8.7 points off index

By Tricia Wright

LONDON, April 23 (Reuters) – Strength in Associated British Foods on U.S. growth prospects and in drugmakers on sector consolidation expectations kept Britain’s top share index near a two-week high on Wednesday.

Clothing and food conglomerate AB Foods surged 8.9 percent, its best one-day percentage gain for 14 years, after saying its fast-growing clothing chain Primark is to set up in the United States.

Panmure Gordon, in response, lifted its rating on AB Foods to “buy” from “hold”.

Persistent bid speculation lifted AstraZeneca by 1.9 percent, and together ABF and AstraZeneca added most points to the FTSE 100, in solid trading volumes, at about 90 percent of their 90-day daily averages.

“Associated British Foods (LSE: ABF.L – news) have come out with a strong set of numbers, while with AstraZeneca, the bid speculation is the key headline that’s still in the background,” London-based Prime Wealth Group senior trader Dafydd Davies said.

AstraZeneca’s rise built on a 4.7 percent gain on Tuesday, after The Sunday Times reported a possible $ 100 billion bid from Pfizer (NYSE: PFE – news) .

Both companies declined to comment on the report, but the prospect of deal-making in the sector also lifted Shire (Dusseldorf: S7E.DU – news) and GlaxoSmithKline (Other OTC: GLAXF – news) for a second consecutive day.

The FTSE 100 – up 0.9 percent on Tuesday to its highest intra-day level since April 4, at 6,706.19 – was down 12.65 points, or 0.2 percent, at 6,669.11 points by 1058 GMT.

Stocks trading without their latest dividend accounted for much of the index’s points drop, with Aggreko (LSE: AGK.L – news) , Antofagasta (Other OTC: ANFGF – news) , BG, Centrica (LSE: CNA.L – news) , Legal & General, Mondi (LSE: MNDI.L – news) , Old Mutual (Other OTC: ODMTY – news) and Rolls Royce knocking off 8.7 points.

While analysts said that a rebound in corporate dealmaking could offset concerns surrounding British companies in terms of frothy valuations and a slashing of analyst forecasts, the FTSE 100 is likely to be stuck in a range in the near term.

The index is trading on a 12-month forward price/earnings ratio of 13.2, against its five-year average of 11 times, Thomson Reuters Datastream shows.

Meanwhile, analysts have been steadily lowering profit forecasts since the start of 2014, data from Thomson Reuters (Frankfurt: TOC.F – news) Datastream shows.

Peel Hunt equity strategist Ian Williams envisaged a period of consolidation for the benchmark until at least mid-year, enabling earnings to catch up and perhaps laying the ground for the market to rise into the end of the year.

“Until we get the UK earnings numbers showing a decisive improvement I think we’ll be stuck in this (sideways) pattern for probably most of Q2,” he said.

The FTSE 100 hit a peak of 6,867 points in late January, its highest level since early 2000, but has since slipped back due to concerns over a slump in emerging markets economies and tensions between Russia and Western powers over Ukraine.

Hantec Markets analyst Richard Perry said that if the FTSE did not break above 6,706 points – a high point from earlier in April – its near-term progress could be limited.

“If it does not get above 6,706 points, it could send out a bit of a sell signal,” he said. (Additional reporting by Sudip Kar-Gupta; Editing by Louise Ireland (Other OTC: IRLD – news) )