* FTSE 100 up 1.0 pct
* Banks gain as Fannie, Freddie news still helps sentiment
* Miners knocked by falling metals prices as dollar rises
By Jon Hopkins
LONDON, Sept 9 (Reuters) - Britain's leading share index was
up 1 percent at midday on Tuesday, boosted once again by a rally
from banks after the U.S. government's plan to take control of
mortgage lenders Fannie Mae and Freddie Mac.
By 1154 GMT the FTSE 100 <> was up 51.0 points at
5,497.3 after closing up 205.6 points, or 3.9 percent, on Monday
and recovering another chunk of last week's 7 percent drop.
U.S. stock futures <SPc1> <DJc1> pointed to a higher opening
on Wall Street after Monday's sharp gains in the wake of the
Fannie and Freddie bail-out move and as a drop in oil prices
eased inflation worries.
"With oil now trading close to $105 per barrel many will be
talking about a test of $100 and with many moving back towards
equity markets after yesterday's good news it could spell the
end for the commodity boom," said Ian Griffiths, a dealer at CMC
Markets.
"The economic calendar is looking rather light of data for
this afternoon so possible fall out in the financial sector and
commodity stocks will be the main focus as traders take stock of
yesterdays moves," Griffiths added.
After gaining sharply in the previous session, banks were
again the main driver behind the FTSE 100 rally .
Royal Bank of Scotland <RBS.L>, HBOS <HBOS.L>, Barclays
<BARC.L>, and Lloyds TSB <LLOY.L> rose between 2.8 and 5
percent.
HSBC <HSBA.L> added 2.1 percent. Traders noted talk that
HSBC could be eyeing troubled Swiss peer UBS <UBSN.VX> although
most dismissed this as unlikely. HSBC declined to comment.
Other financial issues also rallied, with insurers
Prudential <PRU.L> and Legal & General <LGEN.L> up 4.1 and 3.7
percent respectively, while insurer and fund manager Old Mutual
<OLM.L> gained 2.8 percent, all boosted by the recovery in
equity valuations.
The weakness in crude prices was a lift for airlines British
Airways <BAY.L> and easyJet <EZY.L> and cruise operator Carnival
<CCL.L> as fuel costs concerns abated.
U.S. crude oil futures <CLc1> fell back toward a five-month
low at around $105 a barrel on Tuesday as strength in the dollar
drove investors away from commodities.
MINERS WEIGH
Miners were the biggest losers on the strong dollar and as
concerns about global growth and saw gold <XAU=> and other
precious metals prices fall.
Kazakhmys (KAZ.L>, Eurasian Natural Resources <ENRC.L>,
Lonmin <LMI.L>, Xstrata <XTA.L> and Antofagasta <ANTO.L> were
all down between 2.3 and 6.3 percent.
Among oils the picture was more mixed, with Cairn Energy
<CNE.L>, Tullow Oil <TLW.L>, and Royal Dutch Shell <RDSa.L> all
easier.
BG Group <BG.L>, however, rose 1 percent after it admitted
defeat in its hostile bid for Australian utility and gas fields
owner Origin Energy <ORG.AX> after Origin formed a joint venture
with U.S. oil major ConocoPhillips <COP.N>.
Oil services firm Petrofac <PFC.L> lost 2.3 percent after
Deutsche Bank cut its stance to "hold" from "buy" and Goldman
Sachs removed the stock from its "conviction buy" list.
Negative broker comment also knocked drugs blue chip Shire
<SHP.L>, down 2.7 percent after Goldman Sachs cut its rating to
"neutral" from "buy".
In the mid-cap FTSE 250 <>, Qinetiq <QQ.L> was the
worst performer, down 7.5 percent after the UK government said
it was selling its 18.9 percent stake in the company.
Numis Securities said talk suggested the placing price for
the stock on offer via an accelerated book build could be 205
pence.
(Editing by Quentin Bryar)
