Suffering sterling supports FTSE, activist stake boosts Whitbread

* FTSE 100 up 0.3 pct as sterling suffers

* Dollar earners cushion FTSE gains

* Financials, tech, real estate weigh

* Whitbread (Frankfurt: WHF4.F - news) jumps on Sachem Head stake

* Hammerson (Frankfurt: 876140 - news) to buy Intu Properties (LSE: INTU.L - news)

* Saga (Frankfurt: 2S8.F - news) drops after profit warning (Updates prices, adds quotes, detail)

By Kit Rees and Helen Reid

LONDON, Dec (Shanghai: 600875.SS - news) 6 (Reuters) - Britain's top share index was lifted from a two-month low on Wednesday as Brexit negotiations dented the pound, while Costa owner Whitbread got a late boost when activist investor Sachem Head declared a stake in the company.

Britain's blue chip FTSE 100 index rose 0.5 percent to 7,364.05 points, outperforming a negative European market thanks to a weaker sterling, down 0.4 percent on the day.

Large dollar-earning firms, for whom a weaker sterling/dollar exchange rate boosts earnings, were top gainers, with British American Tobacco (Kuala Lumpur: 4162.KL - news) , Imperial Brands (LSE: IMB.L - news) , Diageo (LSE: DGE.L - news) and Unilever (NYSE: UL - news) rising 1.9 to 4.1 percent.

Whitbread was a late riser to the top of the FTSE, shooting up 7.8 percent after U.S. activist investor Sachem Head revealed a stake in the Costa coffee owner.

Tracking weakness in the broader European market, financials took nearly 6 points off the index, with shares in HSBC , Lloyds and Barclays (LSE: BARC.L - news) up to 0.8 percent lower as enthusiasm over U.S. tax reform, which had boosted lenders in the past week, dissipated.

Jitters in tech drove Micro Focus and WorldPay down.

Mid-cap cybersecurity firm Sophos, which has been the best-performing FTSE 250 stock this year, up a cool 105 percent, also tumbled 3.7 percent as investors shunned highly-valued tech stocks.

DEAL OR NO DEAL?

Investors' eyes were glued to developments in fraught Brexit negotiations which have caused swings in sterling.

"Whether or not there is 'sufficient progress' on Brexit divorce talks by the EU Council Summit on 14/15 December is key to our economic outlook," said Bank of America Merrill Lynch strategists in a note.

Irish Prime Minister Leo Varadkar said negotiations over how Brexit would change sensitive Northern Irish border arrangements could pick up again in the new year if a deal was not made this week.

British press reports no such deal would be reached sent sterling down on Wednesday.

Deal-making, of the corporate kind, also added some spice at the single-stock level.

Shares (Berlin: DI6.BE - news) in Hammerson fell 6.1 percent to the bottom of the FTSE after the real estate investment firm said it would buy shopping centre operator Intu Properties, revealing investors' anxieties about value creation in a difficult environment for commercial real estate.

"Shareholders will want to see assets sold down in the merged company to help fund the deal and to reflect the lower demand for brick and mortar stores," said LCG's Jasper Lawler.

Shares in Intu Properties, however, leapt 15 percent and were on track for their biggest one-day gain on record. Intu (Swiss: OXIGTU.SW - news) 's shares were down almost 30 percent ahead of the announcement.

Stifel analysts were more upbeat on the deal: "We think the market will welcome an enlarged REIT (SES: _REIT.SI - news) which will be... more meaningful from a global perspective for REIT investors."

Among other standout movers, shares in travel group Saga dropped 24.8 percent after a profit warning.

(Reporting by Kit Rees and Helen Reid; Editing by Hugh Lawson and Toby Davis)