* FTSE 100 rises 0.7 pct by midday
* Banks weigh, but RBS rises after Merrill initiates "buy"
* Oils turn positive as crude trims losses
* Tesco gains after trading update
By Dominic Lau
LONDON, Dec 2 (Reuters) - Britain's top share index had
edged up by midday on Tuesday, as grocer Tesco <TSCO.L> soared
after a trading update and oil stocks recovered from earlier
losses, offsetting weakness in the banks.
By 1116 GMT the FTSE 100 <> was up 29.59 points, or 0.7
percent at 4,095.08, after falling as much as 2.3 percent
earlier in the session. The UK benchmark slid 5.2 percent on
Monday and is down more than 36 percent for the year on fears of
a deep global recession.
Tesco, Britain's biggest retailer, said its new budget range
was luring an extra 300,000 shoppers a week, boosting its shares
on hopes it may be better placed to cope with a recession than
its rivals. Tesco shares were up 7.9 percent.
Within the food retailing sector, Sainsbury <SBRY.L> sagged
2.6 percent but Morrison Supermarkets <MRW.L> gained 2.5
percent.
Oil shares recovered earlier weakness to trade higher as
crude prices <CLc1> trimmed losses. BP <BP.L> advanced 2.5
percent and Royal Dutch Shell <RDSa.L> strengthened 2.8 percent.
Oil services firm Petrofac <PFC.L> rose 10.9 percent.
"The volumes are still fairly low. There is a rumour doing
the round that (U.S. Treasury Secretary Henry) Paulson has
secured another $150 billion for the banks, but nothing concrete
there," said Manoj Ladwa, senior trader at ETX.
Paulson said on Monday that more programmes were being
developed to stimulate lending but the severe financial crisis
was stubbornly persisting.
Ladwa also said the market was expecting the U.S. Federal
Reserve to make a hefty interest rate cut from the current 1
percent. The Fed holds a two-day rate-setting meeting on Dec 15
and 16.
Banks were the top-weighted losers on the FTSE 100 amid the
darkening global economic outlook. Barclays <BARC.L>, HSBC
<HSBA.L>, Lloyds TSB <LLOY.L>, HBOS <HBOS.L> and Standard
Chartered <STAN.L> shed between 0.6 and 4.1 percent.
Meanwhile the Wall Street Journal said Goldman Sachs <GS.N>
is likely to report a net loss of as much as $2 billion for the
fourth quarter.
Royal Bank of Scotland <RBS.L>, however, advanced 5.1
percent after Merrill Lynch restarted coverage on it with a
"buy" rating and says it should have time to implement a
strategic overhaul.
SHRINKING CONSTRUCTION SECTOR
Britain's construction sector shrank last month at its
fastest pace since records began a decade ago as falling
property prices and a shortage of credit took an increasingly
heavy toll, a survey showed. []
Investors will eye interest rate decisions this week from
both the Bank of England and the European Central Bank. The two
central banks are expected to serve up further monetary policy
easing on Thursday.
Later in the day, U.S. ADP National Employment data for
November will give some indication for the closely-watched
non-farm payrolls employment data due out on Friday.
The U.S. economy has been in recession for a year, the
nation's business cycle arbiter, the National Bureau of Economic
Research declared on Monday.
Overnight, Australia slashed interest rates by a full
percentage point and Japan's central bank said it would accept a
wider range of corporate debt as eligible collateral to ease
Japanese companies' quickly shrinking access to funding as the
end of the year approaches.
Miners also pared losses. Vedanta Resources <VED.L> surged
10.9 percent after the India-focused miner said it would spend
$250 million on buying back up to 10 percent of its shares.
Thomas Cook <TCG.L> rose 5.4 percent after Europe's
second-biggest travel firm reported a sharp rise in full-year
profits and raised its final dividend. Rival TUI Travel <TT.L>
added 1.1 percent.
(Editing by Greg Mahlich)
