* FTSE up 1.1 pct
* Banks rebound from recent falls
* Miners, energy stocks gain as risk appetite returns
By David Brett
LONDON, Aug 17 (Reuters) - Britain's blue-chip shares
extended gains by midday on Tuesday led by financial stocks and
miners as investors' risk appetite returned and after UK
inflation slowed in July.
By 1049 GMT, the FTSE 100 <> was up 54.19 points, or
1.0 percent, at 5,330.29, albeit in holiday-thinned trade.
It ended flat at 5,276.10 on Monday, having retreated over
1.0 percent in the previous week.
The FTSE is flirting with its 200-day moving average of
5340.04 but on very thin volumes, with the index trading at only
20 percent of its 90-day average.
"Generally it's very light volumes, so anything like that
(UK CPI data) is going to give the index a bit of an exaggerated
move," Phil Gillett, trader at Spreadex said.
British consumer price inflation slowed in July but, as
expected, remained above 3 percent. []
Gillett said the inflation data helped cool fears that UK
interest rates would need to rise earlier than expected, leaving
equities as an attractive asset class.
Banks, which have been hamstrung by worries over the
economic recovery in recent days, bounced higher with Royal Bank
of Scotland <RBS.L> up 2.4 percent.
Insurer Aviva <AV.L> rose 2.3 percent having rejected a 5
billion pound ($7.81 billion) offer from rival RSA Insurance
Group <RSA.L> on Monday.
"Given that any kind of bid action from RSA is likely to be
protracted clients are seeing upside in all of the sector," said
Giles Watts, head of equities at City Index.
Mid-cap UK insurance buyout vehicle Resolution <RSL.L> said
on Tuesday it would hunt out further acquisitions in a
consolidating sector, as it posted a half-year profit compared
with a loss a year earlier. []
Resolution shares rose 3.6 percent, while FTSE 100-listed
insurer Prudential <PRU.L> was up 2.3 percent.
COMMODITY SPIKE
Miners rose in tandem with base metal prices, as the sector
remained strong following broker comment on Monday speculating
on stronger future demand from China, the world's largest
consumer of raw materials, which offset worries over growth
prospects in Britain, the U.S. and Japan.
Kazakhmys <KAZ.L> was a top blue-chip riser, up 3.2 percent,
as BofA Merrill Lynch upgraded its recommendation on the miner
to "neutral" from "underperform".
Energy shares were also performing well along with crude
<CLc1>, which snapped a five-day losing streak to rebound above
$76 a barrel as a weaker dollar helped edge out concerns about
the pace of global economic recovery.
Oil majors Royal Dutch Shell <RDSa.L> and BG Group <BG.L>
rose 1.5 and 1.2 percent respectively.
BP <BP.L>, however, fell 0.4 percent as technical issues on
Monday muddled the timing of its planned final kill of its
blown-out Gulf of Mexico oil well. []
Edinburgh-based Cairn Energy <CNE.L> was the top faller,
down 1.1 percent, shedding some of the previous session's gains.
On Monday Vedanta Resources <VED.L> said it would spend up
to $9.6 billion acquiring as much as 60 percent of Cairn India,
in which Cairn Energy holds 62.4 percent.
British Airways <BAY.L>, up 2.3 percent, led a clutch of
travel related firms higher after a threatened walk-out by
airport ground staff, potentially disrupting the plans of
thousands of travellers at the height of the holiday season, was
averted. []
Travel firm TUI Travel <TT.L> gained 2.2 percent and mid-cap
peer Thomas Cook <TCG.L> rose 2.9 percent.
(Editing by Erica Billingham)
