Britain's FTSE lags euro zone peers

* FTSE 100 up 0.4 pct

* Bunzl (LSE: BNZL.L - news) 's acquisitions make investors wary

* Broker upgrades fuel top FTSE risers

* Ladbrokes (LSE: LAD.L - news) tops mid caps after confirms merger talks (Updates prices)

By Alistair Smout

LONDON, June 23 (Reuters) - Britain's top share index edged higher on Tuesday, lagging a Greece-fuelled rally in euro zone shares as weak results from outsourcing company Bunzl dragged on gains.

There was also little cheer from the Confederation of British Industry's (CBI) monthly industrial trends survey, which showed British factory orders grew this month at their weakest pace in almost two years.

Volumes were thin, with just 23 percent of the 90-day average traded by mid-session, and traders said this lack of liquidity made executing block trades difficult. Recent market swings over Greece's debt crisis also dampened trading appetite.

"Investors shouldn't be drawn into trading this market, which (moves) ... in the short run on sound bites alone," said Guy Foster, head of research at Brewin Dolphin (LSE: BRW.L - news) .

The FTSE 100 was up 0.4 percent at 6,849.46 points at 1508 GMT, hitting a new 11-day high as it extended gains from Monday, when it posted its strongest session since May.

The index lagged the blue-chip Euro STOXX 50, which was up 1.4 percent, boosted by hopes that Greece can reach a deal with its creditors this week and by a drop in the euro .

Business supplies distributor Bunzl said organic growth slowed in the first half of the financial year.

While the results were consistent with expectations, traders said that the acquisition of four new businesses had made investors wary.

"The fact they're about to splash the cash around is worrying investors ... Reported performance didn't inspire either," IG (LSE: IGG.L - news) market analyst Chris Beauchamp said.

Sports Direct, Sage Group (LSE: SGE.L - news) , Johnson Matthey (LSE: JMAT.L - news) and Intercontinental Hotels (Other OTC: ICHGF - news) were the top risers after target price hikes from brokers.

The blue chip index underperformed mid-cap stocks, with the FTSE 250 up 0.6 percent.

The top mid-cap riser was Ladbrokes, up 14 percent at a one-year high after the company confirmed it was in merger talks with privately owned Gala Coral Group.

"This deal could help Ladbrokes move on from a more difficult past. If nothing else, increased size of business should reduce costs, and it's a welcome change of direction," IG's Beauchamp said.

Oil services firm Petrofac and Telecom Plus (LSE: TEP.L - news) were also among top FTSE 250 risers after reporting results. (Editing by Catherine Evans)