* FTSE 100 up 1.7 pct
* BP, Shell jump
* Financials provide support (Adds closing prices; OPEC deal)
By Danilo Masoni
MILAN, June 22 (Reuters) - Britain’s top share index rebounded on Friday to post a weekly gain as oil majors got a boost from an OPEC deal to modestly raise output, helping to soothe fears over a trade war and the revived prospect of an interest rate hike in August.
The FTSE 100 ended the day up 1.7 percent, a rise which allowed it to finish on a weekly gain of 0.6 percent and avoid a fifth straight week of losses.
Heavyweights BP and Royal Dutch Shell rose 3 percent and 3.3 percent respectively as oil prices jumped more than 4 percent after major producers agreed to modest crude output increases to compensate for losses in production at a time of rising global demand.
The rise in oil prices might however only give a temporary respite to investors.
“Trade tensions remain the dominant theme, clarity still lacking about how far things will ultimately go between U.S. and China, and the potential ripple effect for world trade,” said Mike van Dulken and Artjom Hatsaturjants at Accendo Markets.
The FTSE hit a seven-week low in the previous session when the index turned lower following a Bank of England policy vote that bolstered expectations of a rate hike in August.
Lenders also provided a lift to the FTSE on Friday with domestically exposed banks Royal Bank of Scotland and Lloyds, which would benefit from tighter monetary policy, rising 1.8 and 1.2 percent respectively.
Sentiment on the sector also found support after big U.S. banks passed the Federal Reserve’s latest stress tests Thursday.
Heightened expectations that the BoE could tighten policy at its next meeting helped the sterling extend its rebound from seven-month lows.
Materials stocks were up as copper prices ticked higher although they were poised for a second week of decline on fears that a trade conflict between the United States and China would hit demand.
Elsewhere, online clothing retailer ASOS fell 5.6 percent on worries that a U.S. internet tax ruling could hit its local earnings. (Reporting by Danilo Masoni and Julien Ponthus Editing by Mark Heinrich)