UPDATE 1-FTSE 100 inches higher yet closes in on worst quarter since 1987

(For a live blog on European stocks, type LIVE/ in an Eikon
news window)

* Analysts warn on rebound despite upbeat China data

* Melrose tops FTSE 100 on cost-cutting plan

* Aston Martin slips on furloughing some employees
(Adds comment, updates prices)

By Devik Jain and Sruthi Shankar

March 31 (Reuters) - UK shares rose on Tuesday as a recovery
in oil prices and a surprise expansion in Chinese factory
activity revived confidence in equity markets amid a deep
selloff this month that set the FTSE 100 on course for its worst
quarter since 1987.

The index rose 2.1%, with turnaround specialist
Melrose Industries surging 19% after it secured a debt
covenant waiver and said it was cutting expenses in an effort to
ride out the coronavirus crisis.

Cigarette maker Imperial Brands rose 11% as it
secured a new 3.5 billion euro ($3.85 billion) credit line and
said it was not seeing any major hit to business from the
outbreak.

The latest data from China showed factory activity
unexpectedly expanded in March from a collapse the month before,
but analysts caution that a durable near-term recovery is far
from assured.

"What we're really looking at the China data is to see if
it's an indicator of how quickly Europe and U.S. can get back to
work potentially after their lockdown," said UBS strategist
Kiran Ganesh.

"If the lockdown ends in May, which is what we're broadly
pricing in, then we may see a similar path of what we've seen in
China."

The FTSE 100 has recovered about 15% since hitting a near
nine-year low on March 16, but remains nearly 25% below its
January record high as entire countries enforced stay-at-home
orders due to the outbreak, halting business activity.

An index of midcap stocks is on course to record its
worst quarterly decline ever, although sentiment has stabilised
towards the end of March after unprecedented stimulus by
policymakers to cushion the pandemic's economic blow.

Oil prices steadied following a near collapse on Monday, as
U.S. President Donald Trump and Russian President Vladimir Putin
agreed to discuss stabilising energy markets, boosting shares in
Royal Dutch Shell Plc and BP Plc.

Travel stocks have also been hit hard in the past month in
the face of an evaporation in passengers, with the wider travel
and leisure index losing 45% in the first quarter.

Supermarket chains Tesco and Sainsbury's
have held up as industry data showed British consumers spent an
additional 1.9 billion pounds ($2.4 billion) on groceries in the
four weeks to March 21.

Luxury carmaker Aston Martin fell 8.7% after saying
it is furloughing some employees as it handles the fallout from
the outbreak, which has closed its car factories.
(Reporting by Devik Jain and Sruthi Shankar in Bengaluru;
Editing by Bernard Orr)