* FTSE 100 up 0.3 pct

* AstraZeneca (NYSE: AZN – news) jumps as Pfizer (NYSE: PFE – news) confirms bid interest

* Mounting Ukraine tensions limit market gains (Adds quotes, details, updates prices)

By Alistair Smout and Tricia Wright

LONDON, April 28 (Reuters) – AstraZeneca shares surged to keep Britain’s top share index close to seven-week highs on Monday, after U.S. rival Pfizer said it wanted to buy the drugmaker.

Pfizer confirmed on Monday it had approached AstraZeneca in January and said it had contacted the company again on April 26 seeking discussions about a takeover.

The takeover would be one of the largest pharmaceuticals deals ever. The renewed approach is the latest in a burst of deal-making and bids in the healthcare industry aimed at gaining scale or specialising in certain areas.

Barclays (LSE: BARC.L – news) said that the preliminary offer would result in a 6 percent increase in earnings by 2017, adding that “Pfizer could pay up to 56 pounds per share or $ 117 billion for AstraZeneca (EUREX: AZNF.EX – news) before transaction costs neutralise any anticipated earnings accretion.”

AstraZeneca shares jumped almost 15 percent, adding about 30 points to the FTSE 100. The shares had already traded at 2 1/2 times their 90-day daily average volume after three hours of trading. Total (NYSE: TOT – news) turnover on the FTSE 100 was less than a fifth of its average.

Astra’s share price gain raised the group’s market capitalisation by roughly 7.7 billion pounds ($ 13 billion).

The prospect of more corporate activity in the sector also lifted Shire (LSE: SHP.L – news) and GlaxoSmithKline (Other OTC: GLAXF – news) . Shire added around 10 percent and GlaxoSmithKline about 6 percent last week.

Without further news, Astra shares were set to consolidate around current levels, extending their gains only if it looks as if a deal is going ahead, traders said.

The FTSE 100 was up 21.21 points, or 0.3 percent, at 6,706.90 by 1013 GMT, with AstraZeneca’s rise enough to bring the index into positive territory. The FTSE 100 was trading within a whisker of seven-week highs.

Darkening the mood, the United States and Europe were preparing new sanctions against Russia as tensions escalated in eastern Ukraine. Pro-Russian rebels on Sunday paraded European monitors they are holding, freeing one but saying they had no plans to release another seven.

Analysts said a rebound in corporate dealmaking could offset concerns about frothy valuations for British firms and lower analyst forecasts, keeping the FTSE 100 stuck in a range for now.

“It just shows how important M&A is to keep sentiment positive given that the macro, although it’s improving, is kind of priced in now, and the earnings season so far has been pretty lukewarm,” said Ian Williams, a Peel Hunt equity strategist.

The index is trading on a 12-month forward price/earnings ratio of about 13 times, against its five-year average of 11 times, even though analysts have been steadily lowering profit forecasts since the start of 2014, data from Thomson Reuters (Frankfurt: TOC.F – news) Datastream shows.

Williams anticipated a period of sideways trade for the index until at least mid-year, allowing earnings to catch up and perhaps paving the way for gains into the end of the year.

“We’re not going to get better earnings newsflow until July/August,” he said.

According to Thomson Reuters StarMine, a fifth of companies on the STOXX Europe 600 index have reported results so far. Half of those beat or met analysts’ expectations. However, only 42 percent met or beat revenue forecasts. ($ 1 = 0.5948 pounds) (Additional reporting by Atul Prakash and Blaise Robinson; Editing by Susan Fenton)