* FTSE up 2 percent
* Energy stocks gain on firmer oil prices
* Banks up as interbank lending shows signs of improving
* Miners hit by hedge fund sales, falling metal prices
(For full coverage of the crisis, click on [])
By Simon Falush
LONDON, Oct 17 (Reuters) - Britain's top share index gained
2 percent by midday on Friday in volatile trade, with gains in
energy and bank stocks outweighing falls in the beleaguered
mining sector.
By 1107 GMT, the FTSE 100 <> was up 95.0 points at
3,956.4 after closing 5.4 percent lower on Thursday. The index
has lost 19 percent in October, on track for its biggest monthly
fall since the 1987 crash and is down 38.7 percent this year.
Energy stocks were among the biggest gainers with oil <CLc1>
prices recovering to trade above $70 per barrel as rising equity
prices lifted hopes for demand and on growing expectations of an
OPEC production cut. <BP.L> gained 4.5 percent, while Royal
Dutch Shell <RDSa.L> rose 6 percent.
But heavily sold miners were the victim of falling metals
prices and forced selling by hedge funds, with early gains wiped
out. Xtrata <XTA.L>, Kazakhmys <KAZ.L> and Lonmin <LMI.L> fell
between 4.2 and 7.6 percent.
"It's (the market) got a mixed feel about it today, we've
had an unravelling of positions by hedge funds in mining stocks,
and as negative news has come in they've opened short
positions," said Paul Mumford, senior fund manager at Cavendish
Asset Management.
Battered banks were broadly higher, with investors slightly
more positive on the struggling sector. HSBC <HSBA.L> gained 1
percent and Lloyds TSB <LLOY.L> rose 3 percent.
"Equities look attractive on a two- to three-year time
horizon and people are beginning to extend their horizons beyond
the current measures to support the banking system," said John
Haynes, senior equity strategist at Rensburg Sheppards.
"Investors are looking to pick up value as they are thinking
enough has been done to achieve those aims."
The chairman of Britain's financial regulator, Adair Turner,
said on Friday that the global banking system is past the danger
of systemic meltdown following government intervention, but
there will still be economic consequences.
Other financial stocks were also in positive territory with
interdealer broker ICAP <IAP.L> gaining 4.4 percent and insurer
Standard Life <SL.L> adding 0.4 percent, while Old Mutual
<OML.L> gained 1.2 percent.
Prudential <PRU.L> lost 4.5 percent after the Financial
Times said the company was forced to deny planning an imminent
rights issue as worries about the global economy spread to
insurers.
Intercontinental Hotels <IHG.L> fell 0.3 percent after JP
Morgan cut its price target on the company and other European
hotel stocks.
UK property shares fell to their lowest level in almost 5
years. Property services firm Savills <SVS.L> warned of lower
profits and worries over rent prospects grew after data this
week fanned recession concerns and showed Britain's commercial
property downturn was accelerating.
The FTSE 350 Real Estate index <.FTNMX8730> fell as much as
4.9 percent to 2,297 points -- its lowest level since December
2003, according to Reuters data.
British Land <BLND.L> and Land Securities <LAND.L> fell 4.3
and 4.8 percent respectively.
(Reporting by Simon Falush; Editing by Jon Loades-Carter)
