FTSE up as commodities gain

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By Simon Falush

LONDON (Reuters) - Gains in commodity stocks offset weakness in banks to leave the top share index slightly firmer in choppy trade by mid-session on Tuesday.

By 11:48 a.m., the FTSE 100 index <.FTSE> was up 0.1 percent or 7.31 points at 5,362.81, recovering from early weakness, having finished up 2 percent on Monday when it recorded its biggest one-day percentage rise in more than six weeks.

The UK blue chip index is up 20.8 percent this year and has soared more than 50 percent since touching a six-year trough in March, but remains 1.1 percent off levels prior to Lehman Brothers' collapse in September 2008.

"As we head to the end of the year, trading is likely to be scrappy as investors will want to book profits and will not want to be too exposed to anything," said Peter Dixon, economist at Commerzbank.

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On a day of muted moves, banks were the biggest fallers.

Europe's biggest bank HSBC and Standard Chartered both fell 1.2 percent, while Royal Bank of Scotland fell 1.2 percent.

Banks were under pressure after ratings agency Standard and Poor's said on Monday that a study of 45 banks found most were weakly capitalised.

Separately, talk of possible capital-raising by Bank of China <601988.SS> also weighed on the sector.

Lloyds Banking Group bucked the trend, rising 1.2 percent after it priced its record 13.5 billion pound rights issue at 37 pence per share, a smaller than expected discount, as it battles to escape a costly state-backed insurance scheme for bad debts.

Barclays also gained, up 0.5 percent.

Miners recovered some early weakness as metals prices inched up from the day's lows, but most remained in negative territory.

Eurasian Natural Resources , Randgold Resources , Fresnillo , Xstrata , and Rio Tinto gained 1.1 to 2.1 percent.

The other main support for the index came from defensive stocks as investors were reluctant to take big positions in more cyclically focussed stocks.

Beverage companies Diageo and SABMiller added 1.1 and 1 percent respectively while utilities Centrica , National Grid and Severn Trent added 0.6 to 1.1 percent.

British power generation company International Power rose 1.8 percent as Evolution Securities repeated its "buy" rating, citing moves in Australia to improve coal plant compensation.

Among other defensives, pest control to parcel delivery firm Rentokil Initial rose 1.2 percent, motor insurer Admiral added 1.6 percent and household cleaning products group Reckitt Benckiser added 1.8 percent.

Among individual fallers, hedge fund firm Man Group Plc fell 0.7 percent as Credit Suisse downgraded its rating to "neutral" from "outperform," on valuation grounds.

A raft of U.S. data due on Tuesday afternoon includes November consumer confidence numbers, the September Case/Schiller home prices survey, and the FHFA home prices index.

Attention will also be on the minutes from the U.S. Federal reserve's Nov 3-4 policy meeting, due after the London close at 1900 GMT.

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