* FTSE 100 index rises 0.6 pct, highest close since Feb 24

* Draghi says ECB poised to shore up economy as soon as June

* Barclays (LSE: BARC.L – news) gains on bold revival plan

* Morrisons rallies; maintains year’s profit forecast

By Tricia Wright

LONDON, May 8 (Reuters) – Britain’s top shares closed at

their highest in more than two months on Thursday, as Barclays (Berlin: BCY.BE – news)

announced a revival plan and investors welcomed the possibility

of more stimulus steps from the European Central Bank in June.

Barclays was the standout gainer on the FTSE 100

, up 7.9 percent after it said it would cut 19,000 jobs

in the next three years and set up a “bad bank”.

“Barclays’ significant restructuring to simplify the group

is welcomed by investors … even if it means the flagship

investment banking division, which has driven things for so

long, needs scaling back,” said Mike van Dulken, head of

research at Accendo Markets.

Britain’s No. 4 grocer, Morrisons, was the

second-best blue-chip riser. The chain kept its profit forecast

for the year after March’s warning, prompting some investors to

close out their hefty negative bets on the stock.

Its shares, which have lost about a quarter of their value

so far this year, rose 4.2 percent. The supermarket is the fifth

most shorted stock on the UK benchmark, with 5.8 percent of its

shares out on loan, according to data from Markit.

The FTSE 100 ended up 42.81 points, or 0.6 percent, at

6,839.25 points, its highest close since February 24.

The ECB, which is trying to counter the risk of excessively

low inflation in the euro zone, kept rates on hold, but

president Mario Draghi said the council “was comfortable” with

the idea of acting next month, after its staff forecasts are


CMC Markets senior market analyst Michael Hewson saw scope

for the UK benchmark to retest 6,875 – the 2013 high – or even


“There is potential for further gains simply because … if

the inflation data continues to show no signs of improving, the

likelihood is that the market will try and front-run a rate cut

or some form of action in June,” Hewson said.

The broader market’s advance was capped by sharp falls in

some shares. Sage Group (LSE: SGE.L – news) fell 5.3 percent as Chief

Executive Guy Berruyer said he would step down and its results

disappointed some investors.

Equity markets have been buoyed in recent weeks by a burst

of deal-making and bids, offsetting concerns about a lacklustre

corporate earnings season.

With valuations for the UK equities not far above their

long-term average, some analysts are bullish. The FTSE 100 index

trades on a 12-month forward price/earnings ratio of 13.5 times,

against its 10-year average of 11.8 times, Thomson Reuters (Frankfurt: TOC.F – news)

Datastream shows.

Ashish Misra, head of investment policy at Lloyds Bank

Private Banking, reckoned on getting about 10 percent total

return from UK equities over the next year, a figure comprising

continued earnings growth at about 7 percent and a dividend

yield of about 3 percent.

“There aren’t too many asset classes that we look at in

global markets which are offering that sort of attractive

double-digit return over a 12-month window,” he said. “I’m less

concerned about the shorter-term noise.”

(Additional reporting by Atul Prakash; Editing by Larry King)