Upbeat US data sends UK shares to biggest weekly gain since July

* FTSE 100 up 0.3 pct at 6,606.58 pts

* Posts biggest weekly gain since July

* Strong U.S. data underpins optimism

* Carnival (LSE: CCL.L - news) leads gainers as outlook improves

By Francesco Canepa

LONDON, Dec 20 (Reuters) - Britain's top share index posted its biggest weekly gain since July after rising for a third straight session on Friday, boosted by strong U.S. data and a rally in cruise operator Carnival.

The U.S. economy grew at its fastest pace in almost two years in the third quarter, revised data showed on Friday, underpinning optimism that the world's largest economy can stand on its own as the Federal Reserve starts to reduce its stimulus programme.

"We've seen an absolute surge in positive data from the U.S.," said Ramin Nakisa, a global macro strategist at UBS (Xetra: UB0BL6 - news) in London.

"We think this is a clarion call for risk assets into 2014. Our biggest overweights are in Europe and in the UK (because) in terms of valuations the U.S. looks more richly valued."

Britain's FTSE 100 traded at 12.5 times its expected earnings for the next 12 months, a four-year high but a 15 percent discount to the U.S. S&P 500 index, Datastream data showed.

The FTSE closed up 21.88 points, or 0.3 percent, at 6,606.58 points on the day and up 2.6 percent on the week, snapping a six-week losing streak and its best week since July.

It was on the verge of marking its best week since January but gave up some gains in very late trade.

The weekly gain comes after the Fed said on Wednesday that it would begin to slow its open-ended asset purchase programme but committed to low interest rates for longer.

Shares in Carnival rose 3.3 percent as strong results made analysts more confident the company is restoring its reputation after a series of incidents.

Volume on the stock was nearly four times its full-day average for the past three months.

"We like the business of Carnival and see potential upside from a brand recovery," Atif Latif, director of trading at Guardian Stockbrokers, said.

Defence company BAE Systems (LSE: BA.L - news) fell 4.5 percent after saying the United Arab Emirates had quit talks to buy the Eurofighter Typhoon aircraft, which analysts at JP Morgan (Other OTC: JPYYL - news) described as a major blow.

Volume on the FTSE was 68 percent above its daily average, having jumped after the expiry of December options.

Around 760,160 options to sell the index at 6,600, equal to 2.5 percent of the total open interest in puts, expired, according to Liffe data.

"There were a lot of puts that expired and that means investors are not hedged for any fall," Andy Ash, head of sales at Monument Securities, said.

"That tends to be a dangerous sign. It means when you do get a fall they will get more panicked."