Commodities, banks power FTSE rise

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By Simon Falush

LONDON (Reuters) - Buoyant commodity prices lifted miners and energy stocks, while improved risk appetite also boosted banks, pushing Britain's top share index 1.7 percent higher in a broad rally early on Monday.

The blue chip index was 88.75 points higher at 5,340.16 by 9:05 a.m. after it closed 0.3 percent lower on Friday and fell in the previous three sessions.

Miners led the rally as gold powered to a record above $1,160 an ounce on Monday, lifted by a retreating dollar, which also promoted a sharp rise in copper prices.

Rio Tinto , Xstrata , Lonmin , Anglo American , Kazakhmys and Fresnillo added 3.6-4.8 percent.

"We're seeing a couple of days of weakness being reversed and there may be a bit of bargain hunting as those who missed the rally since March look to get into equities," said Richard Hunter, head of equities at Hargreaves Lansdown.

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The FTSE 100 is up 20.5 percent this year, and has soared more than 50 percent since touching a six year trough in March.

Energy stocks were boosted as crude also benefited from the weaker dollar. BG Group , BP and Royal Dutch Shell gained 1.2-1.5 percent.

Mid-cap explorer Heritage Oil added 2.7 percent after it said it had agreed to sell its Ugandan interests to Italy's Eni for up to $1.5 billion.

Banks, which tend to be beneficiaries of increasing risk appetite, also rose markedly.

Barclays , HSBC , Standard Chartered and Royal Bank of Scotland added 2.4-3.1 percent.

Lloyds Banking Group added 2.5 percent after it said it had agreed to swap 8.78 billion pounds of bonds as part of a deal aimed at funding its exit from a costly state-backed insurance scheme for bad debts.

Utilities Severn Trent and United Utilities were rare stocks in negative territory, down 0.1 and 0.3 percent respectively, with investors nervous ahead of a ruling from water regulator Ofwat that is expected to enforce price cuts.

But other defensive stocks joined the broad market rally with pharmaceuticals large caps GlaxoSmithKline , AstraZeneca and Shire adding 0.5-1.3 percent.

In the absence of UK data on Monday, investors' attention will be drawn across the Atlantic, with U.S. existing home sales data for October scheduled for release.

According to a Reuters poll of 29 economists, sales of previously owned homes are expected to climb to a seasonally adjusted annual rate of 5.70 million, the fastest pace since 5.73 million units were sold in July 2007 and up from 5.57 million units in September.

British opposition leader David Cameron and a senior government figure are expected to outline their economic plans at the CBI conference in London on Monday.

Pascal Lamy, director general of the World Trade Organisation, told the Sunday Telegraph that the British government could face trade sanctions if it is found guilty of protectionism as a result of the bank bail out.

(Reporting by Simon Falush, editing by Nigel Stephenson)

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