Britain's top share index rose around midday on Friday with banks leading the gainers after being boosted by a positive broker comment.

HSBC raised its call on the sector to overweight for the first time in four years, citing valuation grounds.

The UK's benchmark index <.FTSE> was up 38.53 points, or 0.7 percent at 5,634.08, above its 200-day moving average despite suffering sharp falls in the previous two days.

The index surrendered almost all its remaining 2012 gains when it fell 2.2 percent on Tuesday, its second biggest percentage fall of the year.

Investor unease is reflected in the FTSE 100 Volatility index <.VFTSE>, which has leapt more than 50 percent since April 3 on concerns about global growth and Europe's debt crisis.

The FTSE 100 dipped briefly below the 200-day moving average around the 5,695 level, which is also near 2012 lows, before bouncing back.

Ewen Stewart, UK Strategist at Investec, said his firm has been telling clients to use recent falls as an opportunity to buy equities again because central banks will print money to fight crises.

The biggest risers on the FTSE 100 were the banks <.FTNMX8350>, which added 1.5 percent after the HSBC comment.

On a one month basis banks have shed 6.5 percent as euro zone debt concerns, focused mainly on Spain, have reared their head again, underperforming a 5 percent decline on the FTSE 100.

European banks' price to book ratio is currently 0.6 times according to Thomson Reuters data, while the sector yields a dividend of 4.6 times.

Our case is that at these valuation levels it will not take much good news at all to spark a reassessment and one possible catalyst is signs that earnings are stabilizing, which could well happen over the next quarter of two, HSBC said.

Barclays topped the FTSE 100 leader board, rallying 5 percent as an upgrade in rating to buy from hold on valuation grounds by Investec Securities helped support the stock.

MINOR DELIGHT

Miners rallied too as investors came rushing back in on the dips with the sector up 1.7 percent having shed 10.3 percent over the past month as worries over growth China have crimped the outlook for sector earnings.

I am quite skeptical on China in the long term. There's clearly been an asset bubble but in the short term it's unlikely that Chinese growth will greatly disappoint and they've got scope for fiscal stimulus, Investec's Stewart said.

Miners drew some support from better than expected first-quarter numbers overnight from Alcoa , which kicked off the U.S. earnings season.

Kazakhmys was among the top gainers UK-listed gainers, rising 2 percent.

The FTSE gained as U.S. index futures pointed to a firmer open on Wall Street.

Investors will watch for March U.S. import and export prices due to be released at 1230 GMT, and March's Federal Budget and the latest Federal Reserve Beige Book, both to be published after the London close at 1800 GMT, following weaker than expected payrolls on Friday, which precipitated the sell-off on Tuesday.

Ex-dividend considerations knocked 1.31 points off the FTSE 100 index on Wednesday, with BG Group and IMI both trading without their payout attractions.

On the downside, BSkyB fell 1.3 percent as BofA Merrill Lynch downgraded its recommendation on the pay-TV provider to underperform, lowered its price target to 640 pence and reduced its longer term earnings forecasts by 20 percent.

The bank said it is cutting its earnings forecasts for BSkyB given a less favorable subscriber mix and gross margin erosion (which) more than offset(s) the benefit of the lower broadband wholesale fees recently announced by Ofcom.

BT Group shed 2.3 percent as JPMorgan cut its rating on the telecoms firm to neutral from overweight on valuation grounds, while also citing concerns over its revenue and dividend outlook.

We remain positive on a longer-term view, (but) regulatory drags in Open reach from April may contribute to ‘12/13 revenue guidance being reduced at the FY results on 10 May, while hopes for a dividend hike may be disappointed, JPMorgan said.

Drugmaker Shire was 1.6 percent lower partly because of its defensive attributes, but also with traders citing fading bid hopes after Germany's Bayer, one of a number of possible suitors, failed to mention acquisition moves in its recent update.

(Written by David Brett. Editing by Jeremy Gaunt.)

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