* FTSE 100 gains 2.5 percent by midday
* Mining stocks, banks advance
* Energy stocks fall despite higher oil price
By Harpreet Bhal
LONDON, Oct 30 (Reuters) - Britain's leading share index
climbed 2.5 percent by midday on Thursday, as interest rate cuts
improved investor sentiment, lifting commodity prices and
pushing banks and mining stocks higher.
By 1236 GMT, the benchmark FTSE 100 <> added 104.85
points to 4347.39 after rising slightly in early trade. The FTSE
100 is still down 13.3 percent in October.
Miners were up, adding to sharp gains on Wednesday, as metal
prices stayed above multi-year lows touched earlier in October.
Xstrata <XTA.L> jumped 10.8 percent, while Rio Tinto <RIO.L>
and Lonmin Plc <LMI.L> added 9 percent and 7.7 percent.
Copper miner Kazakhmys <KAZ.L>, soared 19.2 percent after
the company said it would reduce copper output next year due to
lower expected expenditure and said production was in line with
2007.
Banks benefited from the U.S Federal Reserve's move to cut
interest rates by half a percentage point to 1.00 percent on
Wednesday to cushion the impact of a global recession.
"The Fed gave the market what it wanted and at the margin
we're seeing more positive sentiment creeping back in," said
Nicola Chadwick, international economist at CBA. "But underlying
it all are deep-seated fears about global recession."
The U.S. economy shrank at a 0.3 percent annual rate in the
third quarter, its sharpest contraction in three years as
consumers cut spending and businesses reduced investment. Click
on []
China, Norway, Taiwan and Hong Kong also cut rates, paving
the way for the Bank of England and the European Central Bank to
ease policy at their regular meetings next week.
Standard Chartered <STAN.L>, HBOS <HBOS.L>, Barclays
<BARC.L> and Lloyds TSB <LLOY.L> climbed between 3.4 and 8.2
percent, also buoyed by the cost of interbank lending falling.
PRICE FALLS
However a reminder that the economic backdrop is still bleak
came from Nationwide property data which showed house prices
fell 0.5 percent this month.
Heavyweight energy producers were in negative territory
despite oil rising to $68 a barrel, as investors worried about
the outlook for demand.
BP <BP.L> shed 1.2 percent and Royal Dutch Shell <RDSa.L>
fell 2.2 percent with the market reacting negatively to its
third quarter earnings which came in at $10.9 billion, up from
$6.4 billion a year ago.
Shares in British engine maker Rolls Royce <RR.L> rose 10
percent, after the firm reported that trading was in line with
market expectations, prompting Numis to repeat its "add" stance
and 330 pence target price for the stock.
AstraZeneca <AZN.L> advanced 5.6 percent. The drugmaker,
helped by currency effects and cost savings, raised its
full-year earnings forecasts as third-quarter forecasts beat
expectations.
On the downside, insurer Admiral Group <ADML.L> shares fell
15.5 percent, making it the top loser on the index, as investors
abandon safe-haven stocks in search for riskier returns.
"It's a stock that people have hidden in because it's very
robust and has a strong balance sheet," said Peter Eliot,
insurance analyst at MF Global. "In the current environment,
people have been buying it heavily but I guess today they're
thinking it's time to venture out again."
Scottish rail and bus company Stagecoach dipped 5.6 percent
as Panmure Gordon cut its price target on the stock to reflect
the more cautious rail outlook.
For a timeline on the UK recession, click on
http://uk.reuters.com//news/globalcoverage/timelines/timeline?tx=20081029144905.xml&tn=British%20economy%20heads%20for%20recession%20
