Banks, miners help FTSE to 3rd day of gains

* Banks rebound, miners firmer on record gold price

* US unemployment reaches 26-1/2 year high

* Oil slides on demand worries

By David Brett

LONDON, Nov 6 (Reuters) - Britain's leading share index rose for the third day in a row on Friday, reversing earlier losses after the release of bearish U.S. jobs data, on a belief the sell-off had been overdone.

Led by banks and miners, the FTSE 100 .FTSE closed 17.08 points higher, or 0.3 percent, at 5142.72, for a weekly gain of 2 percent -- its best weekly performance for a month.

Data showed the U.S. unemployment rate rose to 10.2 percent, the highest in 26-1/2 years, as employers shed 190,000 in nonfarm payrolls in October. [ID:nN06178752]

The UK market initially turned negative on the data, while Wall Street opened lower and the dollar rose as investors turned risk averse.

However, as investors began to digest the news, U.S. stock indexes turned positive and the greenback retreated.

"The first move lower was overdone. Most traders had priced in double figure unemployment and had it come in under 10 percent I would have expected a move higher," said Jimmy Yates, head of equities at CMC Markets.

"Both the UK and U.S. markets are trading within ranges at this time. The support levels were tested and they held. There's some volatility but still a lot of money waiting on the sidelines," he said, explaining the thin volumes.

Banks were the biggest gainers with part-nationalised Royal Bank of Scotland (RBS.L) up 5.3 percent after more than halving its losses in the third quarter and offering a few shreds of comfort in relation to bad debts.

Lloyds Banking Group (LLOY.L) added 2.2 percent, buoyed by a Citigroup upgrade to "buy" from "hold", accompanied by a significant target hike to 104 pence from 37 after the firm's withdrawal from the UK government's asset protection scheme.

Positive broker sentiment also aided Barclays (BARC.L), up 1.3 percent, with JPMorgan lifting its target price. Standard Chartered (STAN.L) and HSBC (HSBA.L) added 2.1 and 2.5 percent, respectively.

British finance minister Alistair Darling said G20 policymakers are agreed that it is too early to pull the plug on economic life-support packages, as the global recovery is still fragile. [ID:nLAG005901]