Firm commodities prices, BoA results lift FTSE

* FTSE turns positive, up 1 percent

* Miners track firmer metal prices, oil shares turn positive

* HBOS slips after announcing rights issue results

By Rebekah Curtis

LONDON, July 21 (Reuters) - The British blue-chip index rose 1 percent by mid-session on Monday after early losses, as oils and mining shares gained with higher commodities prices and banks jumped after results from Bank of America.

By 1121 GMT, the FTSE 100 .FTSE was up 55.4 points at 5,431.8, after closing up 1.7 percent on Friday, marking its first weekly increase in nine weeks and the end of the longest losing stretch since late May 2002.

Oil shares forged higher, tracking gains of more than 1 percent in crude prices that headed back above $130 a barrel after their biggest one-week slide on record, supported by inconclusive talks at the weekend between Iran and world powers over Tehran's nuclear programme.

BP (BP.L) added 0.5 percent, Royal Dutch Shell (RDSa.L) rose 0.8 percent and BG Group (BG.L) put on 1.2 percent.

"It's always a double-edged sword," said Richard Hunter, head of UK equities at brokerage Hargreaves Lansdown, referring to the rise in oil prices. "It provides support for the oil shares but by the same token it's negative for the economy."

He said investors should expect further volatility in coming sessions in a market still unnerved by a rolling credit crisis. "Jitters abound at the moment ... It's still a market that's in desperate need for a positive catalyst."

But banking stocks extended gains after Bank of America (BAC.N) announced quarterly results that added to hopes the banking sector was stabilising.

Royal Bank of Scotland (RBS.L) added 5.3 percent and Standard Chartered (STAN.L) rose 2.8 percent. HSBC (HSBA.L) advanced 3.8 percent, also after the Sunday Telegraph said the global banking group had held talks with China's sovereign wealth fund over a potential investment in HSBC. [ID:nL20681088]

But HBOS HBOS.L dropped 1.9 percent after shareholders subscribed to buy just 8.3 percent of shares in its $8 billion rights issue, leaving underwriters to try to sell shares worth almost 3.8 billion pounds of shares. [ID:nL21451405]

CAUTIOUS APPROACH

But investors remained cautious because of a poor economic outlook.

Bank of England policymaker David Blanchflower was quoted as saying in a newspaper interview that the British economy was heading into recession and interest rates should fall to "well below" their current 5 percent. ID:nN20348513]

A survey by property website Rightmove showed asking prices for homes in England and Wales fell two percent year-on-year in July, the first annual fall since the series began six years ago. [ID:nL18881500]

Miners gained, helped by a weaker dollar and ahead of expected strong results in coming weeks. Kazakhmys (KAZ.L) rose 4.1 percent, BHP Billiton (BLT.L) added 4 percent and Anglo American (AAL.L) gained 3.7 percent.

Shares in heavyweight Vodafone (VOD.L) fell 2 percent after gaining more than 5 percent in the previous three sessions and ahead of the company's trading update on Tuesday.

Investors will shift their attention to results from Apple (AAPL.O) and Merck & Co (MRK.N) later in the day for further market direction. (Additional reporting by Dominic Lau; Editing by Quentin Bryar)