Corrects paragraph 2 to say deal for 50% of NewMed and deal value is about $2 bln, not $4 bln

By Johann M Cherian

March 28 (Reuters) -UK's FTSE 100 extended gains on Tuesday, following reassuring comments by Bank of England (BOE) Governor Andrew Bailey on the stability of the banking sector, while shares of energy heavy-weight BP jumping 2% also lifted investor sentiment.

Shares of BP Plc BP.L hit a nearly three-week high after the oil firm and Abu Dhabi National Oil Co (ADNOC) made an offer to jointly acquire 50% of Israeli offshore natural gas producer NewMed Energy NWMDp.TA for around $2 billion.

The blue-chip FTSE 100 .FTSE rose 0.4%, while mid-cap index FTSE 250 .FTMC fell 0.4% by 08:51 GMT.

Banks .FTNMX301010 extended gains, rising 0.8% as BoE's Bailey said in a speech that UK lenders were resilient in the face of strains in the global banking system.

Separately, Bailey said that none of the recent bank problems were causing stress in the UK. The pound gained 0.1%. GBP/

Bailey's remarks were soothing for the banking sector and the UK markets, said Stuart Cole, regional financial market analyst at Equiti Capital.

"We've managed to move beyond those fears and are seeing a return of risk appetite back in the market now that the worst fears of the banking crisis have subsided."

The FTSE 100 is set for a nearly 5% slump this month following a banking sector selloff. But for the quarter, the index is now set to eke out a marginal rise helped by gains in the first two months of the year and hopes that the worst is over for global markets.

Marks & Spencer MKS.L advanced 1.7% after its joint venture with Ocado, Ocado Retail retained its annual forecast. Ocado Group OCDO.L reversed earlier gains and was down 3.2%.

Synthomer Plc SYNTS.L tanked 12.2% after the polymer maker said its annual profits were hit due to subdued demand.

Market researcher Kantar said grocery inflation rose again in March to a record 17.5%.

Reporting by Johann M Cherian in Bengaluru; Editing by Sherry Jacob-Phillips and Rashmi Aich

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