Firm commods, banks help FTSE gain 0.7%

* Commodities up; China data helps demand outlook

* Banks higher; Barclays on lookout for U.S. deal

* Defensive drugs, tobacco, food retailers lower

By Jon Hopkins

LONDON, March 10 (Reuters) - Britain's leading share index added 0.7 percent on Wednesday, buoyed by strength in commodity issues, supported by trade data from China, and in banks and insurers as Wall Street put in an early advance.

At the close, the FTSE 100 .FTSE was 38.27 points higher at 5,640.57, a 20 month peak, at levels not seen since June 2008. The blue chip index remained over 60 percent above levels hit almost exactly a year ago when the market reached a trough.

"Wall Street came in with some early gains and stirred the FTSE from an earlier torpor late afternoon," said Mic Mills, senior trader at ETX Capital.

"But aside from strength in heavyweight commodity issues there really looks to be little underlying the advance and with new multi-month peaks being struck, investors might start to find the air getting a bit rarified at these levels," Mills added.

Miners saw the biggest demand as copper prices rose after data showed Chinese exports and imports grew faster than expected in February raised hopes for a global economic recovery. [ID:nSGE6290A5]

Fresnillo (FRES.L), Xstrata (XTA.L), Lonmin (LMI.L), Vedanta Resources (VED.L), and Rio Tinto (RIO.L) were among the best performers, ahead 1.8 to 3.2 percent.

Energy issues were higher supported by a rally in crude prices CLc1, which rose above $82 a barrel after a U.S. government oil inventory report showed an unexpected drop in gasoline stockpiles.

Royal Dutch Shell (RDSa.L), BG Group (BG.L), BP (BP.L) and Cairn Energy (CNE.L) gained 0.8 to 1.5 percent.

But oil explorer Tullow Oil (TLW.L) missed out, losing 0.3 percent after it posted a 92 percent fall in 2009 net profit.

Banks were higher, with global heavyweight HSBC .HSBA.L up 0.7 percent, while part-nationalised lenders Royal Bank of Scotland (RBS.L) and Lloyds Banking Group (LLOY.L) gained 3.9 percent and 3.6 percent, respectively.

Standard Chartered (STAN.L) added 0.5 percent in spite of the stock trading ex-dividend on Wednesday.

Barclays (BARC.L) gained 0.6 percent. The bank was said to be looking to buy a retail bank in the United States to extend its presence after acquiring Lehman Brothers' North American operations in 2008, the Wall Street Journal reported. [ID:nLDE6290UV]

Among individual risers, inter-dealer broker ICAP (IAP.L) jumped 4.5 percent higher excited by news its mid cap peer Tullett Prebon (TLPR.L) was in preliminary offer talks.

Tullett shares surged 25.7 percent higher, topping the FTSE 250 .FTMC index leader board with Australia's Macquarie MQC.AX and Bank of China mentioned as possible predators.

British Airways BAY.L gained 3.7 percent after it, American Airlines AMR.N and Spain's Iberia IBLA.MC offered to cede a number of lucrative trans-Atlantic slots in a bid to gain EU antitrust immunity for their alliance. [ID:nLDE6291ZD]

U.S. blue chips were marginally higher by London's close, up 0.1 percent as a number of merger and acquisition deals offset an unexpected drop in January wholesale inventories. [ID:nN10228689]

EX-DIVS IMPEDE

British American Tobacco (BATS.L) was the biggest faller on the FTSE 100, down 3.1 percent as it traded ex-dividend. Admiral (ADML.L), Schroders (SDR.L), Serco Group (SRP.L), Shire (SHP.L), and TUI Travel (TT.L) all lost their dividend attractions too.

Defensively-perceived stocks were the main drag on the FTSE 100 index. Drugmakers AstraZeneca (AZN.L) and GlaxoSmithKline (GSK.L) both shed 0.1 percent.

Food retailers were weak, with Wm Morrison Supermarket (MRW.L) off 0.2 percent ahead of results due on Thursday. Peers Tesco (TSCO.L) and Sainsbury (SBRY.L) both lost 0.3 percent.

General retailers were weak as well, with Marks & Spencer (MKS.L) down 0.6 percent and Kingfisher (KGF.L) off 0.8 percent.

Sterling skidded to one-week lows against the dollar and euro on Wednesday after data showing an unexpected fall in British manufacturing hit a market already reeling from political and economic worries. [ID:nONS004855] (Editing by Mike Nesbit)