Babcock leads Britain's FTSE higher on nuclear contract win

* FTSE 100 up 0.2 pct, but on course for quarterly drop

* Babcock nearly recoups last week's losses

* Insurers rally after regulator's "blunder"

* Miners extend gains on China stimulus optimism

By Tricia Wright

LONDON, March 31 (Reuters) - Britain's top shares rose onMonday, led by Babcock on the back of a nuclear contract win,and underpinned by appetite for downtrodden insurers andresurgent miners.

Babcock advanced 4.5 percent, the top FTSE 100 riserby some margin in brisk trade, as the engineering contractor andits U.S. peer Fluor were named preferred bidders for a 14-year,7 billion pound ($11.7 billion) contract to manage thedecommissioning of Britain's nuclear sites.

The share price gains saw Babcock almost recoup the lossesseen last week when it announced a big rights issue to fund theacquisition of helicopter firm Avincis.

"Positivity in the stock from what I call 'gold platedgovernment contracts' (on account of both prestige and value)should extend the share price to my six-month target of at least1,550 pence," Jordan Hiscott, senior trader at Gekko GlobalMarkets, said. The shares are currently trading at 1,350 pence.

Trading volume in Babcock was almost three times its 90-daydaily average around mid session, compared with turnover ofaround one third of the daily average for the UK benchmark as awhole.

Insurers rallied, with Resolution, Aviva andLegal & General all up 0.8-1.8 percent, having slumpedin the previous session.

The life insurance sector fell as much as 7.1 percent onFriday on concerns about the extent of a leaked investigation bya UK regulator, before regaining some of its losses after theregulator said the investigation would be limited.

The shares closed 2.6 percent lower on Friday and therecovery continued on Monday.

"The insurance sector is seeing a bit of a relief rally. Theclarification on Friday afternoon helped the insurance sectorpull back from the lows," David Madden, analyst at IG, said.

"For as long as this is hanging (over) the insurance sector,there will be concerns though, even if in the short term we seebargain hunting."

A 1.7 percent rise in Resolution still left it more than 5percent shy of its closing price on Thursday.

MINER STRENGTH

Miners rose 0.7 percent to take their rallysince a March 20 low to nearly 6 percent.

After a string of weaker data reports from China,expectations are building over possible intervention by thegovernment to boost demand in the world's largest metalsconsumer. The Chinese Premier said last week China could act tosupport infrastructure investment.

But the sector traded off its session highs, with copperdown slightly after hitting a two-week high earlier on Monday.

"A bit of a bounce in the sector this morning just on hopesthat commodity prices will get a fillip from the Chinesestimulus - although actually metals prices haven't bounced asmuch as we might have expected which I think is why the marketsare generally just tailing off now," Matt Basi, head of salestrading at CMC Markets, said.

"Until we've got further clarity on what's going tohappen... it's probably wise for people just to be a bit morecautious and take a bit of money off the table."

Rio Tinto led the miners higher with a 2.1 percentgain, as Credit Suisse reiterated the stock on its "focus" list.

"Potential for shareholder returns at Rio Tinto is largerand could be sooner than any of its peer group including BHP,"analysts at Credit Suisse wrote in a note.

By 1119 GMT, the FTSE 100 index was up 12.85 points,or 0.2 percent, at 6,628.43 points, having hit a two-week highearlier on Monday.

However, the index was still down almost 2 percent for theyear on the last day of the first quarter, and set for its firstquarterly fall since June last year.

Concerns over the economic impact of ongoing tensionsbetween Russia and the West over Ukraine, as well as weaker datafrom the United States and China, hit stocks in the early partof the year.

"If you look at the sell-off we've had compared to all thenegative news we have, we would have seen a much worse sell-offif there wasn't underlying strength in this market to startwith," IG's Madden said.

($1 = 0.6011 British Pounds) (Additional reporting by Alistair Smout; Editing by AndrewHeavens)