Banks help FTSE gain 0.2% ahead of U.S. jobs data

Britain's leading share index was up 0.2 percent approaching midday on Friday with a rally by banks offsetting weakness in oil majors in thin trade as investors await the key U.S. October jobs report.

At 1136 GMT, the FTSE 100 .FTSE was 10.63 points higher at 5,136.27, on track for around a 1.6 percent increase on the week, which would be the best weekly performance for a month.

We have seen some investors come in and take some profits off the table but at present it is really quiet as everyone is looking ahead to the non-farm payrolls, said Joshua Raymond, market strategist at City Index.

The U.S. economy is expected to have shed 175,000 jobs in October, the 22nd month of job losses, but lower than the 263,000 cuts seen in September. Unemployment, however, is forecast to climb to 9.9 percent.

If we see that the U.S. economy actually lost closer to 100,000 jobs than 200,000, then investors could react quite positively and we could end the week on a high. However, a weak number and the 5,100 support level on the FTSE could come under threat quickly, Raymond said.

A rally by banking stocks provided the main strength for UK blue chips as investors digested a third-quarter trading statement from Royal Bank of Scotland (RBS.L), which the top blue-chip riser, up 7.5 percent.

Part-nationalised RBS made an operating loss of 1.5 billion pounds ($2.5 billion) in the third quarter as it took 3.3 billion pounds of bad debts and profits at its investment bank arm more than halved from the previous quarter.

Lloyds Banking Group (LLOY.L) added 3.2 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 2.7 percent, with JPMorgan lifting its target price. Standard Chartered (STAN.L) and HSBC (HSBA.L) both added 2 percent.

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.

Annual input price inflation for British manufacturers turned positive in October for the first time since February, driven by a rebound in crude oil prices, official data showed.

MINERS PROVIDE A PROP

Miners enjoyed a rally against a backdrop of firmer metals prices, and were bolstered by upbeat broker comment.

Antofagasta (ANTO.L), up 1.6 percent, was helped by a Citigroup upgrade to buy, while Rio Tinto (RIO.L), Eurasian Natural Resources (ENRC.L), Xstrata (XTA.L) and Kazakhmys (KAZ.L) added 0.7 to 1.4 percent.

Weakness in oil majors, after a rally on Thursday, proved the main drag on the FTSE 100 index, with BP (BP.L), BG Group (BG.L) and Royal Dutch Shell (RDSa.L) off 0.8 to 1.1 percent.

Among individual movers, British Airways (BAY.L) gained 6.4 percent as investors welcomed second-quarter results from the airline with BofA Merrill Lynch repeating its buy rating on the stock.

Rentokil Initial (RTO.L), however, shed 7.4 percent as a third-quarter trading update from the pest control to parcel delivery firm failed to excite.

Moves higher this week have been made difficult by investor nerves and mixed sentiment. Investors have been highly sensitive to economic data and this is why today's jobs data is so important and could have a long lasting effect on how the market behaves not just today but in the near term also, Raymond said.