* FTSE 100 index up 0.5 percent
* Tesco rebounds after Unilever dispute resolved
* Man Group surges after strong update (Adds detail, updates prices at close)
By Kit Rees and Atul Prakash
LONDON, Oct 14 (Reuters) - Britain's leading share index climbed on Friday after falling in the previous three sessions, with grocer Tesco recovering while mid-cap Man Group surging after a strong trading update.
Man Group, the world's biggest listed hedge fund, leapt 13.8 percent for its best day since February 2014 after saying demand for its quantitative strategies and market gains had pushed quarterly funds under management up 6 percent.
"2016 is shaping up to be a poor year of investment performance for a significant proportion of Man Group's products," Shore Capital analysts said. "However, such has been the underperformance of the share price that it appears to us that the market views the current level of profitability as the new norm."
The blue-chip FTSE 100 index was up 0.5 percent at 7,013.55 points at its close, having fallen to its lowest level in more than a week on Thursday. The index, dominated by international companies, set a record high earlier in the week, boosted by a slump in the pound to a 31-year low.
The pound's drop has helped many FTSE 100 companies that get much of their revenue in dollars, but a weaker pound can also hit consumer confidence, which often hurts small and medium-sized firms. The index is up 20 percent in sterling terms from its post-Brexit low, but has gained only 7 percent in dollar terms.
The domestically focused FTSE mid-cap index was up 0.6 percent. The index is also up around 20 percent since June 24, when the results of Britain's referendum on leaving the EU became known.
Britain's biggest retailer, Tesco, rose 4.4 percent, the top gainer in the FTSE 100, after settling a pricing row with Unilever that had halted online sales of goods produced by the Anglo-Dutch giant. The dispute was triggered by the plunge in the pound.
Unilever shares fell 1.4 percent.
"It seems that in the war that has erupted between supermarkets and their suppliers because of the weaker pound, Tesco has won its first battle," Jasper Lawler, market analyst at CMC Markets, said.
Shares in hospital operator Mediclinic rose 3.3 percent to 914.50 pence after Deutsche Bank raised its rating on the stock to "buy" and its target price to 1,100 pence from 1,030. (Reporting by Atul Prakash; Editing by Kevin Liffey and John Stonestreet)