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FTSE bounces back, AB Foods heads for best day in 16 years

(ADVISORY- Follow European and UK stock markets in real time on the Reuters Live Markets blog on Eikon, see cpurl://apps.cp./cms/?pageId=livemarkets)

* FTSE 100 index up 1.6 pct

* AB Foods surges nearly 9 pct

* Banking, property stocks rebound

By Atul Prakash

LONDON, July 7 (Reuters) - Britain's top share index bounced back on Thursday, with Associated British Foods (LSE: ABF.L - news) heading for its biggest one-day gain in 16 years after an encouraging update, while energy shares mirrored gains in crude oil prices.

Banking and property-related stocks, battered in the previous sessions on concerns about economic growth following last month's vote in Britain to leave the European Union, were also in demand as some investors looked for bargains.

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Associated British Foods surged nearly 9 percent, the top gainer in the blue-chip FTSE 100 index, after saying it was sticking to plans to expand its Primark clothing chain across Europe and the United States, and was optimistic about continued growth despite uncertainty created by Brexit.

"The rout in the British pound is the primary factor and has enabled the Associated British Foods to strengthen its position outside its home market," Naeem Aslam, chief market analyst at Think Markets, said.

"The weakness in the currency is the main denominator for the FTSE 100 index and investors will look very carefully that how lower currency has enabled firms to boost their profits."

The benchmark FTSE 100 index, dominated by internationally exposed companies, was up 1.6 percent after closing more than 1 percent lower in the previous session. Britain's domestically-focused FTSE 250 index was up 1.9 percent.

Despite a sharp sell-off after the Brexit vote, the FTSE 100 is up about 3 percent since its close on June 23. However, it is down 10 percent in dollar terms as the slump in sterling to a 31-year low has reduced the dollar value of the market. In contrast, the FTSE 250 is down 8.5 percent in sterling terms.

Energy shares tracked crude oil prices higher. The UK oil and gas index was up 1.6 percent, helped by a rise of nearly 2 percent in shares of BP and Royal Dutch Shell (Xetra: A0ET6Q - news) .

Some sectors rebounded from steep losses earlier in the week, with UK banks rising 2 percent and the FTSE 350 Real Estate (OTC BB: REACD - news) index gaining 3.7 percent, helped by a 5 to 7 percnet rise in shares of land Securities, Persimmon (Other OTC: PSMMF - news) and British Land (LSE: BLND.L - news) .

Property-related companies came under intense selling pressure in the previous session on lingering concerns about the sector's growth outlook. Several firms have suspended dealings in their UK property funds this week after heavy redemptions from retail investors, underscoring concerns over demand for office space and retail property in the country.

Stock markets also got some support from the minutes for the June 14-15 meeting of the U.S (Other OTC: UBGXF - news) . Federal Reserve late on Wednesday showing the Fed's policymakers decided interest rate hikes should stay on hold until the consequences of Britain's EU referendum became clearer.

"An environment of 'lower for longer' interest tends to be good for equity markets," Augustin Eden, analyst at Accendo Markets, said.

British retailer Sports Direct surged 11.6 percnet despite posting a 0.5 percent drop in annual core earnings, the bottom end of guidance given in January, blaming tough trading conditions and negative publicity about its working practices.

"Disappointing they might have been, but many analysts had feared even worse and so the numbers were greeted with relief by the market, helped also by the company's announcement that it intends to start buying-back stock," Hargreaves Lansdown (LSE: HL.L - news) said.

(Reporting by Atul Prakash)