* FTSE 100 up 0.5 pct; Arm leaps on bid talk
* Banks, miners rally; upbeat comments on U.S. economy
* BP down on dividend, litigation worries
By David Brett
LONDON, June 10 (Reuters) - Britain's top shares rose by midday on Thursday, as gains in banks and miners on improved economic sentiment outpaced losses in BP <BP.L>, hurt by worries about costs associated with an oil spill in the Gulf of Mexico.
By 1002 GMT, the FTSE 100 <
> was up 23.59 points, or 0.5 percent, at 5,109.45, having broken a three-day losing streak on Wednesday, closing up 1.2 percent."The FTSE showed healthy signs of strength, as despite the falls in BP, the miners and banks gradually drove the market from the its lows into positive territory," Giles Watts, head of equities at City Index.
Despite early falls as investor sentiment was weighed on by BP concerns, banks rebounded, helped by positive comments made by Federal Reserve Chairman Ben Bernanke on the U.S. economy overnight and ahead of the latest interest rate decision from the Bank of England due at 1100 GMT, at which no change is expected.
Barclays <BARC.L>, HSBC <HSBA.L>, Lloyds Banking Group <LLOY.L>, Royal Bank of Scotland <RBS.L> and Standard Chartered <STAN.L> were up 0.5 to 2.2 percent.
The European Central Bank will also announce its interest rate decision on Thursday, with the status quo expected to be maintained as well when an announcement is made at 1145 GMT.
Miners were firmer along with metals prices as market confidence was boosted after China reported a surge in total exports in May, lifting the demand outlook. [
]Fresnillo <FRES.L>, Rio Tinto <RIO.L> and Eurasian Natural Resources <ENRC.L> added 2.1 to 2.7 percent.
Elsewhere, ARM Holdings <ARM.L> soared over 10 percent with traders citing old rumours resurfacing of bid interest from Apple <AAPL.O>.
A spokeswoman for ARM said it has not received an approach, and said a takeover from Apple would not make sense.
ARM was also been benefiting from the launch of the new iPhone and from strong sales from the new iPad, both of which analysts say use ARM technology.
The talk boosted interest in mid-cap peers Imagination Technologies <IMG.L>, in which Apple holds a stake, and CSR <CSR.L> up 10.1 and 3.1 percent respectively, while small-cap chipmaker Wolfson Microelectronics <WLF.L> climbed 3.9 percent.
BP BLUES
Oil major, BP was down 4 percent, having recovered from early falls of over 11 percent, with investors' main concerns surrounding the company's ability to pay its dividend and the costs BP will have to assume to deal with liabilities related to the disaster. [
]The cost of the response effort to date has been around $1.43 billion, the company said.
BP has shed as much as 45 percent of its value since the oil began to spill on April 21, and hit its lowest level since April 1997.
"There is a feeling amongst investors that if BP can give early decisive direction over the dividend issue preferably before the Q2 results this could underpin the stock, and we could see a rally from these levels," City Index's Watts said.
The ongoing problems continued to dent sentiment towards the energy sector, with peers Royal Dutch Shell <RDSa.L> and BG Group <BG.L> down 0.8 and 0.6 percent respectively, while oil explorer Tullow Oil <TLW.L> shed 0.3 percent.
Meanwhile, Britain's No.1 household goods retailer Home Retail Group <HOME.L> dropped 3.8 percent, the second biggest FTSE 100 faller, after it posted a bigger than expected decline in first-quarter sales. (Editing by Hans Peters)