By Michael Taylor

LONDON (Reuters) - The leading share index rose 1.5 percent on Wednesday, lifted by bid talk around insurers and property firm Liberty International, and a surprise fillip from U.S. services data.

The FTSE 100 index added 85.8 points to close at 5,853.5, breaking a five-day losing streak.

Other European shares also ended higher, mirroring a trend in U.S. stock markets after a better-than-expected reading for a gauge of U.S. service sector activity. See

"Wall Street has been generally impressed with the economic data as this is heaping on the pressure for the Fed to effect another rate cut later in the month which will further boost the popularity of stocks," said Jimmy Yates, a trader at CMC Markets.

The blue-chip index has now fallen over 9 percent this year on fears of a U.S. recession and further credit-related writedowns by financial institutions.

Among shares, talk of a rescue deal for ailing U.S. bond insurer Ambac Financial Group boosted insurers.

Prudential was 6.8 percent higher after shareholders in China's Ping An Insurance approved a plan to raise about $17 billion (8.5 billion pounds), prompting fresh speculation it could take a stake in a European insurer.

Aviva gained 3.8 percent, Old Mutual added 3.5 percent and Legal & General was up 4.1 percent.