Britain's FTSE rises as Shire surges

* Shire lifted by talk it may bid for a U.S. rival

* Burberry extends previous day's slide

* GKN hit by estimates downgrade from Liberum

By Kit Rees

LONDON, Oct 16 (Reuters) - Britain's top share index rose onFriday, lifted by drugmaker Shire, whose shares rose onspeculation it could be lining up a bid for a U.S. rival.

The blue-chip FTSE 100 index was up by 0.4 percentat 6,361.05 points going into the close of the trading session.

Shire rose 3.2 percent, which traders attributed to marketspeculation it was preparing a bid for U.S. peer Radius Health,seen as a potentially good deal for the British group.

Officials at Shire could not be immediately reached forcomment.

Traders added that expectations of new stimulus measuresfrom China, the world's second-biggest economy, were givingequity markets a further lift.

"With half an eye on the possibility of more central bankstimulus, stocks have edged out a positive finish to the week,"said CMC Markets analyst Jasper Lawler.

Burberry was among the worst performing stocks onthe FTSE, falling 2.1 percent to extend the previous session'sslide, as a profit warning late on Thursday from Hugo Boss hit luxury goods companies.

Hugo Boss cut its 2015 sales and profit outlook, while pricetarget cuts from brokers on Burberry's shares on Friday addedfurther pressure to the British company, whose shares hadalready slumped 8.3 percent on Thursday on weak sales growth.

GKN and other engineering stocks fell afterbrokerage Liberum cut its estimates across the sector. (Editing by Toby Chopra and Mark Potter)