FTSE up 0.2 percent as banks rally, miners retreat

Britain's top share index was up 0.2 percent by midday on Thursday, supported by firmer banks on news Bank of America was set to repay government bailout funds,but miners fell as the recent sector rally ran out of steam.

At 1149 GMT, the FTSE 100 was 8.48 points higher at 5,335.47, having closed up 15.22 points at 5,327.39 on Wednesday, extending gains into a third consecutive session.

"Investor volume has started to taper off as we trade backtowards the high end of the range on the FTSE" said Nick Serff, market analyst at City Index.

"With the ECB meeting later this afternoon and (U.S.) non-farm payroll data tomorrow, we could see the market consolidate around these levels over the next 24 hours." 

Banks were the top risers with sentiment helped by Bank of America Corp's announcement it was to repay $45 billion of government bailout funds.

Lloyds Banking Group, Royal Bank of Scotland, HSBC, Barclays and Standard Chartered rose 1.0-4.1 percent.

Banks across the industry need to exercise restraint on remuneration, British business secretary Peter Mandelson said on Thursday when asked about bonuses at state-controlled RBS.

Life insurers were back in favour, with Legal & General, Prudential, Aviva, and Standard Life rallying 1.7-3.6 percent.

Oils were higher but mixed as crude prices CLc1 held firm above $77 a barrel following falls on Wednesday.

BP, BG Group, and Tullow Oil lost 0.1-0.7 percent, but Royal Dutch Shell and Cairn Energy rose 0.9 percent and 0.6 percent respectively.

Cairn Energy is to seek approval for a 10-for-1 share split.

Among individual gainers, Kingfisher added 0.7 percent after Europe's biggest home improvements retailer be at third-quarter profit forecasts and said it was cutting debt more quickly than expected.

Peer Home Retail Group rose 1.7 percent on aread-across from Kingfisher and helped by UBS which upgraded its earnings forecasts for 2010 and 2011. 

British Airways, up 2.8 percent, was in demand ahead of November passenger traffic numbers, due at 1415 GMT.

MINERS RETREAT

Heavyweight miners topped the FTSE 100 fallers list,reversing earlier gains as the gold price slipped back after hitting fresh record highs on Thursday, and other metal prices steadied after recent advances.

Xstrata, Fresnillo, Rio Tinto, Lonmin, and Anglo American shed 0.6-2.1 percent.

Mobile telecoms heavyweight Vodafone fell 0.8 percent, giving back some of Wednesday's gain having been buoyed then by a Credit Suisse target price hike.

Among mid-cap stocks, pubs group Marston's added 1.8 percent and gave a further boost to the sector when saying trade continued to improve, after posting a 13.5 percent fall in full-year pretax profit.

Punch Taverns, Greene King J.D. Wetherspoon and Mitchells & Butler gained 0.9-1.8 percent on the back of the news, which followed strong numbers from Greene King on Tuesday.

Britain's service sector grew more slowly than expected in November, a purchasing managers' survey showed, but new business continued to pick up and firms were optimistic. 

The Chartered Institute of Purchasing and Supply/Markit activity index fell to 56.6 last month from October's two-year high of 56.9. That was the seventh consecutive month above the 50 level that indicates expansion but below expectations for a rise to 57.0.

Investors were awaiting news from the latest European Central Bank Council meeting, due at 1245 GMT, and initial weekly U.S. jobless claims numbers, due at 1330 GMT, especially ahead of the November U.S. employment report, scheduled for release on Friday.