UPDATE 2-Smith & Nephew tops forecasts, sees mkt stabilising

* Adjusted EPS 16.8 cents vs consensus 14 cents

* Says market showing early signs of stabilising

* Guidance unchanged

* Shares up as much as 3.5 percent, reach month high (Adds CEO comments, share price, analyst reaction)

By Ben Deighton

LONDON, Nov 6 (Reuters) - Smith & Nephew Plc (SN.L: Quote, Profile, Research), Europe's leading maker of replacement hips and knees, said there were early signs of its market stabilising as patients in the United States resume spending on surgical procedures.

Shares in Smith & Nephew rose as much as 3.5 percent to a month high of 559 pence on Friday after the group also posted better-than-expected third quarter earnings.

"We saw the volumes in the U.S. market particularly increase a little bit over the second quarter sequentially, so (there has been) a couple of percent increase in volumes, so that was a good sign," S&N Chief Executive David Illingworth told reporters.

"We're not seeing anything unusual on the pricing side other than the things that we've been dealing with for a while now," he said, noting these were early signs of the market stabilising.