UK's FTSE rises as Vodafone and Sainsbury surge

* FTSE 100 closes up 0.2 pct at 6,627.40 points

* Vodafone surges 5.4 pct after raising earnings outlook

* Sainsbury rises ahead of results on Wednesday

* InterContinental Hotels (Other OTC: ICHGF - news) rises as hedge fund urges tie-up

* Fall in oil price hits shares of oil companies

By Sudip Kar-Gupta

LONDON, Nov 11 (Reuters) - Britain's top equity index advanced to its highest level in more than a month on Tuesday, as a rise in mobile operator Vodafone and supermarket retailer Sainsbury offset a slump in energy stocks.

The blue-chip FTSE 100 index closed up by 0.2 percent, or 16.15 points, at 6,627.40 points - its best closing level since late September.

The shares of Vodafone, the world's second-biggest mobile operator, rose 5.4 percent after the company lifted its earnings outlook.

Sainsbury also advanced 5.7 percent, which traders said reflected investors cancelling negative "short" bets on the stock ahead of Sainsbury's interim results on Wednesday.

Cutting costs, investment, prices and dividends are likely to be among the initiatives announced by new Sainsbury boss Mike Coupe on Wednesday, when he reveals his plan for coping with the toughest market conditions for decades.

InterContinental Hotels also rose 3.4 percent after activist hedge fund Marcato Capital Management again urged InterContinental to merge with a rival, saying a tie-up could help the company's share price more than double.

However, energy stocks such as BP and Royal Dutch Shell (LSE: RDSB.L - news) weakened after the price of Brent crude oil fell close to four-year lows.

The FTSE hit a peak of 6,904.86 points at the start of September, its highest since early 2000. It then slumped to 15-month lows in October as weak European economic data knocked back stock markets but it has since clawed back ground.

Tom Robertson, senior trader at Accendo Markets, said the FTSE could have a strong run up to Christmas if it managed to stay above 6,600 points.

Securequity sales trader Jawaid Afsar thought it unlikely that the FTSE would hit record highs of 7,000 points by the end of 2014 - a scenario envisaged by many earlier this year - but said he would still use any dips in the FTSE as a buying opportunity.

"Low interest rates are here to stay for some time and the returns from the high-yielding stocks still make them an attractive play," he said. (Additional reporting by Atul Prakash; Editing by Gareth Jones and Susan Fenton)