* FTSE 100 up 0.3 pct, after four days of losses
By Sudip Kar-Gupta
LONDON, July 11 (Reuters) - Britain's top equity index rebounded on Friday as merger activity lifted tobacco shares, enabling the stock market to regain some poise after four days of losses.
Reynolds and Lorillard are negotiating a deal that would merge the United States' second- and third-biggest cigarette makers, Reuters has previously reported. Shares (Frankfurt: DI6.F - news) in British American Tobacco (BAT), which owns 42 percent of Reynolds, also advanced 0.5 percent.
Together, Imperial Tobacco and BAT added the most points to the FTSE 100, which was up by 0.3 percent - or 16.41 points - at 6,688.78 points by the middle of the trading day.
The two tobacco stocks also benefited on Friday from their "defensive" characteristics of stable profits and dividends - often favoured by investors during times of market uncertainty. Financial markets have been unsettled by problems with Portuguese bank Banco Espirito Santo.
"We've seen investors switch into the more defensive stocks such as BAT," said Brown Shipley fund manager John Smith.
The FTSE 100's retreat since the start of July has pushed it down from peaks reached in late May, which took the index close to record highs. Traders expect it to remain stuck in its recent trading ranges, from a high just below 6,900 points to lows around 6,600.
"A trading range seems the most likely outcome," said Lex Van Dam, a hedge fund manager at Hampstead Capital. (Additional reporting by Tricia Wright; Editing by Larry King)