FTSE led up by banks and miners, shrugs off BoE

* No expansion to the BoE quantitative easing scheme

* Band of England keeps interest rates at 0.5 percent

* Miners, banks and oils lead FTSE higher

By David Brett

LONDON, July 9 (Reuters) - Britain's leading share index was up 0.7 percent at midday on Thursday, led by miners and banks, and showing little reaction to the Bank of England's decision not to expand its quantitative easing programme.

By 1122 GMT, the FTSE 100 .FTSE index was 26.94 points higher at 4,167.17 after closing down 46.77 points, or 1.1 percent, on Wednesday, its lowest close in more than two months.

The Bank of England said there would be no expansion of its quantitative easing scheme, while the market had widely expected the Bank to continue pumping money into the economy until August. [ID:nTAR005441]

The Bank said it would keep interest rates steady at 0.5 percent, as expected.

"I am a bit surprised that the market didn't react a little bit more, because it's basically telling us that the Bank is not in a hurry to expand its facility ... given it hasn't done a lot to boost lending," said Commerzbank economist Peter Dixon.

"There has been a much bigger reaction in the bond market. It's not really a big equity market story."

Miners were the FTSE's top performers following Wednesday's sell off, encouraged by earnings news from Alcoa (AA.N).

Anglo American (AAL.L), Vedanta Resources (VED.L), Kazakhmys (KAZ.L), Antofagasta (ANTO.L), Rio Tinto (RIO.L), BHP Billiton (BLT.L) and Xstrata (XTA.L) gained between 2.2 and 4.6 percent.

All of Anglo American's leading institutional shareholders turned down Xstrata's (XTA.L) proposed 140 billion pound nil-premium merger of equals, The Times reported.

Silver miner Fresnillo (FRES.L) was the top FTSE 100 gainer, up 8.9 percent, after Citigroup upgraded its rating to "buy" from "hold".

Banking rallied following recent falls, with Royal Bank of Scotland (RBS.L), Lloyds Banking Group (LLOY.L), and HSBC (HSBA.L) up 1.4 to 1.7 percent.

OILS RALLY

Oil producers gained as the price of crude bounced back from a seven-week low. BG Group (BG.L), BP.L (BP.L) and Royal Dutch Shell (RDSa.L) added between 0.4 and 1 percent.

Oil rose by more than $1 on Thursday to edge back above $61 a barrel, halting a six-session losing streak that has seen prices fall 15 percent on concerns about the timing of economic recovery.

Defensive stocks were the main fallers as an element of risk appetite returned to the market, with drugs, drinks and tobaccos the worst performing sectors.

Among them, Shire (SHP.L) and AstraZeneca (AZN.L) lost 0.7 and 0.6 percent, respectively, while Diageo (DGE.L) shed 0.3 percent.

British Airways (BAY.L) was among the top gainers, lifted on news of the appointment of a new chairman of Iberia (IBLA.MC), and as the BA chief executive said merger talks with the Spanish airline continued. (Editing by Will Waterman)