* FTSE 100 up 0.5 pct
* Mining stocks rise after upbeat China data
* FTSE starts Q3 well after uninspiring first half
* Tesco, Morrison fall as Kantar survey shows sales drop
By Francesco Canepa
LONDON, July 1 (Reuters) - Britain's top share index started the second half of the year on a positive note, towed higher by mining stocks after fresh data pointed to continuing demand from China, the world's biggest metals consumer.
Mining and industrial metals stocks rose 2 percent each, the top sectoral gainers, after public and private surveys from China showed government policy was helping to support demand in the economy.
Resilient Chinese demand helped to push copper to its highest in nearly four months earlier on Tuesday, helping global miners such as Rio Tinto and BHP Billiton gain nearly 3 percent each.
"We believe that returns to shareholders will come through as 2014 progresses," Jeremy Batstone-Carr, market analyst at Charles Stanley, said.
"If investors are piling in to bet on this, then perhaps the FTSE 100 will have a better performance in the third quarter than it has had so far this year."
The FTSE 350 mining index ended the first half of the year up by a meagre 0.5 percent while the industrial metal index fell 21 percent, the worst performing sector in Britain. Both were hit by a continued fall in the price of metals such as iron ore and copper.
Copper accounted for 12 percent of Rio's and 22 percent of BHP Billiton's revenues last year, with iron ore the largest revenue source for both companies. Iron ore prices are still down 30 percent from their end-2013 level, leading some traders to express caution on mining stocks.
"Short term momentum may see further upside in copper...but we think the underlying equities have too many headwinds to rally much further from present levels," a trader in London said.
"With iron ore still very weak and with copper such a relative small part of the large diversified names...the miners will run out of steam."
Precious metal miners such as Randgold and Fresnillo were also strong gainers, after gold hit a three month high as escalating violence in Iraq boosted its safe-haven appeal.
The FTSE 100 was up 30.35 points, or 0.5 percent, at 6,774.29 points, tipping the index into slightly positive territory for the year on the first day of the third quarter.
The 0.4 percent gain for the index so far in 2014 compares poorly to a 4.2 percent gain for euro zone blue chips, which have benefited as the European Central Bank moves to ease policy just as the Bank of England considers tightening it.
The FTSE 100 is nearly 2 percent off its 2014 peak of 6,894.88 in May, which marked its highest since December 1999.
Morrisons was the top FTSE faller, down 1.8 percent, as data by Kantar Worldpanel showed sales at the supermarket fell 3.8 percent in the 12 weeks to June 22. Tesco, whose sales fell 1.9 percent, saw its shares dip 1.2 percent. (Additional reporting by Alistair Smout; Editing by Foo Yun Chee)