FTSE records best week since July, Sky surges 27 pct on Fox bid

* Blue-chip FTSE 100 index ends 0.3 pct higher

* Index posts biggest weekly gain in 5 months

* Sky jumps 27 pct on takeover approach (ADVISORY- Follow European and UK stock markets in real time onthe Reuters Live Markets blog on Eikon, see cpurl://apps.cp./cms/?pageId=livemarkets)

By Atul Prakash and Peter Hobson

LONDON, Dec 9 (Reuters) - Britain's top stock index recordedits biggest weekly rise in five months, with a late boost onFriday when Sky shares surged by more than 25 percenton a takeover approach from Twenty-First Century Fox.

Sky shares recorded their biggest ever one-day percentagegain after the European pay-TV group said it had been approachedby Rupert Murdoch's Twenty-First Century Fox.

Fox, which owns 39.1 percent of Sky according to ThomsonReuters data, values the company at about 18.48 billion pounds($23.23 billion) with its bid. Fox will pay 11.25 billion poundsfor what it doesn't already own of Sky.

"The deal is likely to see the light of the day as Murdochhas interest in both the firms. It looks more like some tidyhousekeeping," said Jawaid Afsar, senior trader at Securequity.

"The news has changed the whole dynamics by putting thesector in play. Some other companies in the sector could attractserious buyers," he added.

Sky helped the blue-chip FTSE 100 to close 0.3percent higher, taking the index's total gains for the week tomore than 3 percent - the biggest weekly rise since early July.

The week-long rally has been driven by financial stocks,which rose across Europe after the "No" result in Italy'sconstitutional referendum inflicted less damage than thought.

The market was also helped by the European Central Bank'splan to scale back its monthly asset purchases, a surprise movethat lifted euro zone bond yields, which in turn are seenhelping reduce pressure on bank profits.

However, the UK banking index fell 1 percent onFriday after surging 7.3 percent this week - the best weeklygain since April. Barclays, Lloyds and RoyalBank of Scotland fell 1.3-2.5 percent.

A decision by Britain's financial watchdog to delay itsfinal verdict on setting a deadline for consumers to claimcompensation for being mis-sold debt repayment insurance alsoput pressure on banks.

After large gains in recent days, Chris Beauchamp, chiefmarket analyst at traders IG, said it was "not surprising to seea bit of weakness creeping in".

Shares in "defensive" stocks with steadier incomes anddividends were in demand.

Pharmaceutical companies GlaxoSmithKline and Shire rose 1.2 percent and 2.4 percent respectively, whileBritish American Tobacco, Imperial Brands andUnilever gained between 1.1 and 1.9 percent.

AstraZeneca rose nearly 4 percent after its immunotherapy drug durvalumab, the British drugmaker's mostimportant pipeline medicine, was accepted for review by U.S.regulators to treat bladder cancer, potentially its first use. (Editing by Jeremy Gaunt and Alexander Smith)