UPDATE 2-Fed signals help FTSE 100 brush off Italy woes, buyout spurs Acacia

* FTSE 100 up 0.2%, FTSE 250 up 0.4%

* Acacia jumps on Barrick's increased buyout offer

* Dovish comments from Fed officials spur rate cut hopes

* Italy's political woes hit financial stocks

* WPP down after rival Publicis cuts forecast (Adds news items, updates to closing prices)

By Shashwat Awasthi

July 19 (Reuters) - London's FTSE 100 ended higher on Friday as bolstered hopes of a U.S. interest rate cut stoked risk appetite, though the index's advances were reined in after political turmoil in Italy triggered a broad sell-off in bank stocks.

The blue-chip index ended up 0.2%, after climbing as much as 0.7%. The mid-cap FTSE 250 rose 0.4%, as Acacia Mining soared after agreeing to an increased buyout offer from Barrick Gold.

Acacia surged more than 19% to 222.6 pence on its best day ever after Barrick, its largest shareholder, agreed to buy out the remaining shares in the company it does not already own at an implied value of 232 pence a share.

However, fresh political troubles in Italy amid speculation that the government might collapse, drove investors away from financial stocks across Europe. RBS and Lloyds lost more than 1% each on the FTSE 100.

Still, the main index held on to gains, which came after top U.S. Federal Reserve officials on Thursday argued the need to quickly stimulate the economy, cementing bets that the Fed will cut rates at its July 30-31 policy meeting.

"While it is looking increasingly certain that the Fed will probably cut rates this month, it is stretching credibility to suggest that they will cut by 50 basis points," CMC Markets analyst Michael Hewson said.

Spurred in part by lingering expectations of interest rate cuts by central banks, the exporter-heavy FTSE 100 has overcome a slump it suffered in May due to global trade uncertainty, and is on course for its best year since 2016.

The index has also benefited as Brexit risks have pummelled the pound. On Friday, those risks were heightened as a Reuters poll showed eurosceptic Boris Johnson leading Jeremy Hunt in the race to be the next Prime Minister.

However, an unexpected rebound in retail sales in June did raise hopes that the sector could tide over risks from a Brexit-driven hit to consumer sentiment.

Ocado jumped 4.7% on the main index, while Just Eat and Sainsbury's also rose.

Travel firm TUI added 5.1% on hopes that it would be compensated by Boeing, after the U.S. planemaker said it would take a $4.9 billion charge related to estimated disruptions from the grounding of its 737 MAX jets.

But WPP slid 2.2% after French rival Publicis cut its annual revenue growth target. Publicis is struggling to revive sluggish sales in the U.S. amid increasing competition for ad dollars from Facebook and Google .

(Reporting by Shashwat Awasthi in Bengaluru Editing by Saumyadeb Chakrabarty and Frances Kerry)