UK equities muted as risk appetite fades after recent gains; DS Smith, Diploma jump

DS Smith surges on deal discussions with International Paper

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Diploma jumps on Peerless Aerospace Fastener acquisition

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TI Fluid Systems plunges on discounted share placement

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FTSE 100 flat, FTSE 250 up 0.2%

March 27 (Reuters) - Britain's FTSE 100 ended flat on Wednesday as investors stayed away from making big bets in a holiday-shortened week, while paper and packaging firm DS Smith and specialised products and service distributor Diploma on deal-related news.

DS Smith jumped 10.2% after the firm confirmed it was in discussions with International Paper over an all-stock buyout for 5.72 billion pounds ($7.22 billion) from its U.S.-listed rival.

Also capping losses, Diploma soared 9.5% after the company said it would acquire Peerless Aerospace Fastener for 236 million pounds ($297.88 million).

Gold miners led the charge in sectoral gains with 4.2% jump, tracking higher bullion prices.

On the flip side, automobiles and parts index dropped the most, down 4.6%, dragged lower by a 15% slump in automotive fluid storage firm TI Fluid Systems's shares after a discounted share placement.

The FTSE 100 index ended flat, while the domestically oriented FTSE 250 edged 0.2% higher to notch another more than one-year closing high.

The blue-chip UK stocks index has traded in a tight range this week as investors digested recent gains after dovish signals from major central banks, including the Bank of England (BoE) drove the blue-chip index to its best week gain in more than six months and a one-year high on Friday.

Investors were focussed on a key reading of the U.S. personal consumption expenditure price index (PCE), the Federal Reserve's preferred inflation gauge, due on Friday, when most global markets will be shut for the Good Friday holiday.

"Positioning is on the long side in equities. Hence, this week could see a modest pullback in risky assets on any position squaring," said Mohit Kumar, chief economist Europe at Jefferies.

Investors will now turn to the UK's fourth-quarter gross domestic product (GDP) readings due on Thursday. (Reporting by Siddarth S, Pranav Kashyap and Medha Singh in Bengaluru; Editing by Mrigank Dhaniwala, Sohini Goswami and Angus MacSwan)