FTSE 100 rebounds, but still shy of 7,000, as trade fears ease

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* FTSE 100 up 0.4 pct

* Fresnillo jumps 3.7 pct on Goldman upgrade

* Smurfit Kappa rejects revised International Paper bid

* JD Sports rises 3 pct on Finish Line takeover

* Speedy Hire jumps 7 pct after results

By Helen Reid

LONDON, March 26 (Reuters) - British shares rebounded from a 15-month low on Monday as trade war rhetoric cooled down, with energy and financials - some of the worst hit by last week's sell-off - leading the recovery.

Fears of a full-blown trade conflict between the world's two biggest economies eased on a report that the United States has contacted China seeking measures to reduce their trade imbalance. This followed the Trump administration's decision to impose $60 billion in tariffs on Chinese imports. FTSE 100 .FTSE was up 0.4 percent by 0820 GMT, driven higher by energy, financials and healthcare sectors. It was trading at 6,948 points, still under the 7,000 level.

UniCredit strategists downgraded their view on basic materials and chemicals, saying they would prefer more "defensive", high dividend-yielding sectors such as healthcare, utilities, consumer staples seen as less risky - in the context of trade tensions.

"It is easy to forget against the backdrop of Brexit-related uncertainty that the UK market has offered defensive merits at times like this," wrote Ian Williams, equity strategist at Peel Hunt, in a note.

"The UK is already a huge consensus short among global investors, which may limit the relative downside," he added.

Fresnillo FRES.L jumped 3.7 percent after Goldman Sachs (NYSE: GS ) analysts upgraded the stock to "buy" and added it to their "conviction list", based on their bullish position on gold.

"Our commodities team is bullish on gold for the first time in more than five years based on higher inflation, rising EM wealth and concerns about an equity correction," wrote Goldman strategists, upgrading the whole gold mining sector.

Randgold Resources RRS.L also gained 1.5 percent after the Goldman upgrade to "buy".

M&A news continued to be a driver across large and mid-size stocks.

Smurfit Kappa SKG.L shares dipped 3 percent, the worst performers on the FTSE, after the firm spurned a renewed offer from International Paper IP.N jumped to a record high on news of the takeover approach early this month, Smurfit's shares are now down 7 percent from that peak.

Among mid-caps, JD Sports JD.L led the pack, rising 3.9 percent after agreeing to buy Finish Line, one of the largest retailers of athletic footwear and apparel in the U.S., for $558 million. U.S. acquisition allows the company to enter the largest sportswear market in the world with a leading player with both a significant physical store footprint, together with an online presence," wrote Shore Capital analysts.

Inchcape INCH.L also benefited from a takeover move, gaining 1.3 percent after saying it would buy Grupo Rudelman, an auto distribution business in Central America. Inc DAN.N increased its cash offer for GKN GKN.L by $140 million, ramping up its efforts to fend off rival suitor Melrose. GKN shares rose 0.6 percent, while Melrose gained 0.1 percent. and equipment hire company Speedy Hire SDY.L rose 7.7 percent to the top of the small-caps index after saying full-year profits were likely to be ahead of expectations. analysts are downgrading their estimates for FTSE 100 earnings, and the leading UK index has underperformed European peers over the past 12 months.