FTSE gains, led by banks; eyes on Fed

* FTSE up 0.7 percent; banks rebound

* Banks rally; Basle rules grace period report

* Energy stocks buoyed by rise in crude

LONDON, Dec 16 (Reuters) - Britain’s top share index was higher on Wednesday morning, helped by a rebound from the banking sector, in thin trade as investors awaited news from the latest U.S. Federal Reserve policy meeting.

At 0920 GMT, the FTSE 100 .FTSE was up 36.40 points at 5,322.16, after it closed 0.6 percent down at 5,285.77 on Tuesday.

“It’s very much looking like one of those wind-down days towards Christmas where investors are fairly unwilling to open any new positions this close to the New Year,” said Richard Hunter, head of UK equities at Hargreaves Lansdown.

The index is up 54 percent from a six-year low in March, though it is still 1.6 percent below its level in mid-September 2008 before the collapse of Lehman Brothers.

Banks bounced back after falls on Tuesday, following on from gains by Asian peers on a report the Basle Committee on Banking Supervision has agreed to effectively delay enforcement of new capital adequacy rules for major banks.

“Assuming this story to be accurate, we see a good chance of a correction in bank stocks, which have been heavily sold off since September,” BofA Merrill Lynch said in a note.

“However, plans to introduce stricter capital requirements remain unchanged, and the committee intends to gradually introduce the new rules starting in 2012,” the broker said.

Barclays BARC.L, HSBC HSBA.L and Lloyds Banking Group LLOY.L rose 0.5 percent to 1 percent, while Royal Bank of Scotland RBS.L, also helped by a Citigroup target price hike, added 0.6 percent.

British banks will press the government for more clarity on a controversial supertax when representatives meet the Treasury. [ID:nLDE5BE0ZX]

Energy stocks were higher, also reversing the previous session's falls, supported by a 0.6 percent rise in the crude price CLc1. BP BP.L, BG Group BG.L and Royal Dutch Shell RDSa.L added 0.2-0.6 percent.

Drugmakers were in demand. AstraZeneca AZN.L put on 0.6 percent after the U.S. Food and Drug Administration backed the wider use of its cholesterol drug Crestor. [ID:nWEN7577]

GlaxoSmithKline GSK.L, meanwhile, added 0.9 percent. Belgia pharma group Galapagos GLPG.BR says it had broadened its arthritis alliance with the company. [ID:nWEA5780]

Among individual movers, Rentokil Initial RTO.L was a top blue-chip riser, up 2 percent, buoyed by a price target hike from Deutsche Bank.

Unilever ULVR.L climbed 0.8 percent. The consumer goods company's annual China sales have reached 1 billion euros ($1.46 billion) and annual growth is expected to be at least 15 percent, a top executive said on Wednesday. [ID:nTOE5BF04E]


The mining sector was on the back foot, extending falls from the previous session, despite a backdrop of higher metals prices, with Antofagasta ANTO.L, Lonmin LMI.L and Xstrata XTA.L off 0.6-0.7 percent.

BHP Billiton BLT.L shed 1 percent. The miner has offered to buy the Australian state of Queensland's coal freight business, the Australian said on Wednesday. BHP declined to comment. [ID:nSGE5BE0LJ]

A broker downgrade pressured Diageo DGE.L, off 0.2 percent, with Deutsche Bank cutting its rating on the drinks company to 'hold' from 'buy'.

United Utilities UU.L went ex-dividend, taking 0.3 point off the FTSE 100 index as the stock lost its payout attraction.

Investors will look to unemployment data at 0930 GMT for more clues on the outlook for the British economy. The number of those claiming benefits for November was seen increasing 13,300 after rising 12,900 the previous month.

The U.S. Federal Reserve will conclude its two-day policy setting meeting on Wednesday, with a statement due after the London market’s close.

The Fed was expected to stick to its super-loose monetary policy stance as high unemployment constrains policy-makers’ enthusiasm about the economy’s recent improvement. (Editing by Dan Lalor)