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UPDATE 2-Coronavirus vaccine hopes guide British stocks higher

Muvija M and Shashwat Awasthi

* FTSE 100 up 0.6%, FTSE 250 up 0.4%

* Reports of coronavirus treatment trigger sharp gains

* Imperial Brands, GSK underperform FTSE 100

* Smurfit Kappa rises, supports peer DS Smith (Adds news items, analyst comments, updates to closing prices)

Feb 5 (Reuters) - UK shares got a shot in the arm on Wednesday after media reports that scientists had developed a drug against the China-linked coronavirus, though Imperial Brands and GlaxoSmithKline missed out after downbeat financial updates.

The FTSE 100 overturned earlier losses to rise 0.6% and the FTSE 250 added 0.4%. Both indexes ended higher for the third straight session.

A Chinese TV report said researchers at Zhejiang University had found an effective drug for the virus, while Britain's Sky News said researchers had made a "significant breakthrough" in developing a vaccine.

Though the World Health Organisation played down the reports, markets bet that the outbreak would be contained soon. An index of travel and leisure stocks jumped 1.3% and enjoyed its best day in more than a week.

"Traders have latched onto the headlines and are buying into the market with the view the health crisis could be brought under control," CMC Markets analyst David Madden said.

The blue-chip bourse had dropped 3.4% in January, more than twice the fall suffered by its European counterpart due to its greater exposure to commodity prices.

However, the UK benchmarks have rebounded this week after China announced stimulus measures to safeguard against any hit from the outbreak, which has killed nearly 500 people.

Tobacco group Imperial Brands slid 6.6%, its worst day in more than four months, after it forecast lower profit because of a U.S. regulatory ban on some flavours of cartridge-based vapour devices.

After noon, GSK skidded 4.2% on its worst day since early October, as cheap competition to its respiratory medicines led to fourth-quarter earnings missing analysts' estimates.

"The launch of generic rivals to blockbuster asthma treatment Advair/Seretide was always going to cause GSK problems this year," Hargreaves Lansdown analyst Nicholas Hyett said.

By contrast, packaging products makers Smurfit Kappa and DS Smith topped the main board, rising more than 6% each, after the former posted higher annual core earnings.

Housebuilder Barratt climbed 2.2% higher after announcing an increase in first-half earnings and a special dividend.

Among midcaps, Tullow Oil firmed 4.6% after a source said the energy firm plans to cut a third of its staff to save about $20 million. Its shares have tanked nearly 75% since November amid a plethora of setbacks. (Reporting by Muvija M in Bengaluru; Editing by Bernard Orr)