* FTSE 100 up 0.7 percent
* Oils higher; BP rallies as bad news abates
* Drugmakers higher on Barcap upgrades
By David Brett
LONDON, June 10 (Reuters) - A rally by embattled oil giant BP <BP.L> contributed half of the 0.7 percent gain by Britain's top share index on Friday, while strength in drug stocks also helped counter a weaker showing by banks.
By 1112 GMT, the FTSE 100 <
> was up 36.89 points at 5,169.39, having closed 0.9 percent higher on Thursday.BP added 8.4 percent, rallying after recent sharp falls as the flow of bad news from the oil slick disaster in the Gulf of Mexico abated, and investors focused on hopes that the firm may just reduce dividend payments rather than suspend them.
U.S. President Barack Obama and senior administration officials will meet BP chairman Carl-Henric Svanberg next Wednesday, the White House announced on Thursday. [
]"BP seems to be turning the corner and gradually getting more and more of this oil on board which is good news. There's a little less fear and panic out there at the moment," Panmure Gordon analyst Peter Hitchens said.
BP's valuation has dropped to just over 70 billion pounds ($102 billion) versus over 120 billion pounds when the Gulf of Mexico disaster began in April.
Other energy shares, which have fallen back as sentiment towards the sector deteriorated as BP's crisis has rolled on, were also higher, with Royal Dutch Shell <RDSa.L> and BG Group <BG.L> up 1.4 and 0.9 percent respectively.
Overall, however, trading was light in London, with turnover at around 30 percent of the average daily volume.
"It would not surprise me if most investors are actually waiting for the kick off to the 2010 World Cup than looking at the markets today, Joshua Raymond, market strategist at City Index said.
"My assumption would also be that this could be a familiar occurrence over the next four weeks as the World Cup continues."
DRUGS WANTED
Positive broker comment lifted drugmakers GlaxoSmithKline <GSK.L> and AstraZeneca <AZN.L> up 1.8 and 1.6 percent, respectively. Barclays Capital raised its rating on both firns to "overweight" from "equal-weight".
Positive broker comment also helped Eurasian Natural Resources <ENRC.L>, up 1.4 percent, as HSBC upgraded its rating for the Kazakh-based miner to "overweight" from "neutral" citing valuation grounds.
Meanwhile, M&A news boosted sentiment towards insurers after mid cap Brit Insurance <BRE.L>, up 20.5 percent, confirmed it rejected a takeover offer. [
]The insurance underwriting sector has long been seen as a candidate for consolidation and Brit's mid cap peers benefited from the news, with Amlin <AML.L>, Catlin <CGL.L> Hiscox <HSX.L> and Beazley <BEZG.L> adding 1.2 to 6.4 percent.
Blue chip insurers also gained, Aviva <AV.L>, Legal & General <LGEN.L> and Admiral Group <ADML.L> up 0.7 to 1.9 percent.
But on the downside, banks fell back as a recent recovery by the sector reversed. Standard Chartered <STAN.L> was the biggest FTSE 100 faller, down 2 percent, as the emerging markets bank as trading began on Friday in its new Indian shares at a discount to the London-listed shares.
Part-nationalised Lloyds Banking Group <LLOY.L> and Royal Bank of Scotland <RBS.L> both shed 1.7 percent, but Barclays <BARC.L> and HSBC <HSBA.L> managed to add 0.8 and 0.1 percent.
Britons' expectations for inflation over the next 12 months jumped to 3.3 percent in May, the highest level in nearly two years, a quarterly survey from the Bank of England showed on Friday. [
]Wall Street futures pointed to a slightly higher open ahead of U.S. May retail sales data, due at 1230 GMT, and the first reading for June's Reuters/University of Michigan consumer sentiment index, due at 1355 GMT. (Editing by Hans Peters)