* FTSE 100 up 0.3 pct, outperforms other Europe indexes

* Deal hopes buoy Smith & Nephew (LSE: SN.L – news) , Weir – traders

* Results disappointment hits Kingfisher (LSE: KGF.L – news) shares

By Atul Prakash and Lionel Laurent

LONDON, May 29 (Reuters) – Britain’s top share index edged higher to trade near a 14-year high on Thursday, with takeover speculation surrounding companies such as Smith & Nephew and Weir Group (Frankfurt: 42W.F – news) lifting investors’ appetite for riskier assets.

The FTSE 100 index was 0.3 percent higher at 1021 GMT, outperforming slightly lower benchmark indexes in France, Germany, Italy and Spain. Trading volumes were just 14 percent of the index’s 90-day daily average because of a public holiday in many European countries.

The benchmark index hovered just below the 14-year high scaled earlier this month and was just less than 2 percent away from a record peak set in 1999.

Medical-devices manufacturer Smith & Nephew was the top performer in the FTSE 100 index, up 4.2 percent, extending Wednesday’s gains after a press report of a planned takeover bid from U.S. rival Stryker (Berlin: SYK.BE – news) .

Although Stryker denied it was planning a bid, traders said the return of takeover speculation would continue to support S&N shares in particular and the broader market in general.

“The improving economic backdrop and the pick up in business confidence are likely to be supportive for a pickup in M&A activity,” said Robert Parkes, equity strategist at HSBC.

“In addition, valuations are not stretched and there appears to be an element of pent up demand as a result of the depressed level of deal activity we have seen over the last few years.”

Engineering company Weir Group was also a strong gainer, up 1.6 percent, a day after it abandoned efforts to acquire rival Metso (Dusseldorf: VLM.DU – news) . The Finnish company had rejected Weir’s second, improved takeover bid.

Bankers have said a failure to merge with Metso could make Weir, already frequently the subject of takeover speculation, a target for big players such as General Electric (Swiss: GE.SW – news) or Honeywell that are keen to access the Glasgow-based company’s lucrative position in U.S. shale.

Merger news also spread to Man Group (Other OTC: MNGPF – news) and helped the hedge-fund manager to gain 5 percent after it confirmed it was in talks to buy U.S. asset manager Numeric Holdings.

But some disappointment on the earnings front countered the M&A froth in the market.

Kingfisher, Europe’s biggest home improvement retailer, was down 5.1 percent even though the group reported a 20 percent rise in first quarter retail profit and said it would pay a 100 million pound ($ 167 million) special dividend.

“(Results were) marginally behind market and our expectations because of the margin impact to UK profits and a weaker than expected performance in France and China,” Cantor Fitzgerald analysts wrote in a note to clients.

Water company Severn Trent (Other OTC: STRNY – news) , meanwhile, reported a 7 percent rise in annual underlying pre-tax profit to 269.1 million pounds ($ 449.6 million), beating the analyst consensus. The water supplier also said it was paying a dividend of 80.4 pence for the 2013/14 financial year, a 6 percent rise.

Severn Trent shares were up 0.5 percent. (Editing by Catherine Evans)