UK's FTSE rises as bid talk drives up Smith & Nephew

* FTSE 100 up 0.2 pct

* ECB cuts interest rates to record lows

* Smith & Nephew (LSE: SN.L - news) up on report of Medtronic (NYSE: MDT - news) bid interest

By Sudip Kar-Gupta

LONDON, June 5 (Reuters) - Britain's top equity index rose on Thursday, buoyed by medical devices company Smith & Nephew which was lifted by new bid speculation.

The London market also tracked gains in European stock markets, which rose after the European Central Bank (ECB) cut interest rates to record lows on Thursday and unveiled new measures to strengthen the region's economy and fight off the risk of Japan-life deflation.

The blue-chip FTSE 100 index was up by 0.2 percent, or 10.14 points, at 6,828.77 points going into the close of the trading day.

Smith & Nephew rose 3.5 percent, making it one of the best-performing FTSE stocks in percentage terms, after a media report that U.S. rival Medtronic was looking at bidding for it. Smith & Nephew declined to comment on the report.

Smith & Nephew's shares had also risen at the end of May, on speculation that rival Stryker (Berlin: SYK.BE - news) would bid for it. Stryker denied it was planning a bid but traders said Smith & Nephew would continue to be supported by the backdrop of takeover talk.

"There's no smoke without fire. As long as you've got the takeover talk in the background, there should be further upside in the stock," said Dafydd Davies, senior trader at London-based Prime Wealth Group.

The FTSE hit a peak of 6,894.88 points last month, which marked its highest level since December 1999.

The index is up by around 1 percent since the start of 2014, but some traders said it needed to break out above the 7,000 point level - which would mark a record high for the FTSE - in order to start a stronger rally on the market.

"We have yet to test the psychological level of 7,000 in the FTSE. I feel that this alone could be a major turning point in the direction of the UK stocks," said Intertrader chief market strategist Steve Ruffley. (Additional reporting by Tricia Wright; Editing by Pravin Char)