FTSE up as housing package lifts banks, builders

* FTSE 100 rises 0.3 pct * Govt housing package boosts banks, housebuilders * Weak crude and metal prices weigh on commodity stocks

* BA, Carnival, tour operators gain on lower crude prices

By Simon Falush

LONDON, Sept 2 (Reuters) - Britain's leading share index gained 0.3 percent on Tuesday as a UK government plan to bolster the slumping housing market lifted banks, although heavyweight commodity stocks fell on weaker metal and crude prices.

The FTSE 100 .FTSE closed up 17.9 points at 5,620.7, reversing earlier losses but underperforming other major European indexes because of its heavy weighting in commodity stocks.

Prime Minister Gordon Brown cut an unpopular tax on home purchases as part of a package to boost the country's slumping housing market and lift his flagging political fortunes. [ID:nL2277915]

This bolstered banks, construction companies and home goods retailers, all linked to the ailing housing market, though the gains were capped by the relatively limited scale of the measures.

"Home builders are up on support from the government fiscal package but on a broad perspective, (the measures) are not going to have much impact on the housing market," said Nick Bate, UK economist at Morgan Stanley.

He said with house prices falling at around 1 percent a month, these measures would do little to boost confidence.

Banks were the top-weighted gainers on the index, with Barclays (BARC.L), Royal Bank of Scotland (RBS.L), HSBC (HSBA.L), Lloyds TSB (LLOY.L) and Standard Chartered (STAN.L) rising between 0.5 and 2.8 percent. HBOS HBOS.L bucked the trend, losing 2.2 percent.

Mid-cap housebuilders Persimmon (PSN.L), Taylor Wimpey (TW.L), Barratt Developments (BDEV.L), Bovis Homes (BVS.L) and Bellway (BWY.L) soared between 5.4 and 10.1 percent.

FTSE 100-listed building materials distributor Wolseley (WOS.L), which also has a large presence in the U.S., rose 5.4 percent.

The support for the housing market also aided retailers, with home improvement groups Kingfisher (KGF.L) up 4.2 percent and Home Retail (HOME.L) gaining 2.6 percent.

SINKING STERLING

Sterling sunk to a 2-1/2-year low against a resurgent dollar GBP=, as the beleaguered UK currency's battering continued amid fears of a UK economy on the brink of recession.

But analysts said this would have a positive impact on stocks.

"The heart of the matter is that the pound is going down. That does mean for a lot of the overseas earners, particularly the dollar earners, and will translate into higher sterling profit," said Edward Menashy, economist at Charles Stanley.

Menashy also said the fall in oil prices helped ease the strain on companies and household spending.

With crude prices CLc1 falling as low as $105 a barrel, British Airways BAY.L, cruise operator Carnival (CCL.L) and tour operators Thomas Cook (TCG.L) and TUI Travel (TT.L) put on 4.4 to 7.4 percent.

Energy stocks, however, suffered. BP (BP.L), Royal Dutch Shell (RDSa.L), gas producer BG Group (BG.L), Tullow Oil (TLW.L) and Cairn Energy (CNE.L) lost between 1.3 and 4.0 percent.

Weaker metal prices also weighed on mining stocks, with BHP Billiton (BLT.L), Rio Tinto (RIO.L), Xstrata (XTA.L), Anglo American (AAL.L), Antofagasta (ANTO.L), Vedanta Resources (VED.L) and Eurasian Natural Resources (ENRC.L) down 4.8 to 2.8 percent.

Lonmin (LMI.L) outperformed the index holding steady after the world's third-biggest platinum producer rejected again Xstrata's hostile $10 billion takeover bid as undervaluing the firm and said it was exploring options. [ID:nL2632470]

Pubs group Greene King (GNK.L) said it would meet its expectations for the current financial year, despite tough trading and a lacklustre outlook for the UK economy. The mid-cap firm was up 6 percent.

Within the pub sector, Enterprise Inns (ETI.L), Whitbread (WTB.L), Punch Taverns (PUB.L) and Mitchells & Butlers (MAB.L) climbed between 3.8 and 9.1 percent. (Additional reporting by Dominic Lau; Editing by Erica Billingham)