Britain's FTSE 100 share index hit a 3-week high on Thursday, fired up by strong resources and bank stocks, although trading levels were modest ahead of a U.S. interest rate decision.

Banks saw HSBC and Royal Bank of Scotland gain 1.1 percent, while Barclays put on 1.5 percent.

Traders said an easing of concerns that the Federal Reserve would hike U.S. interest rates by 50 basis points instead of 25 basis points as previously expected helped the banks. Higher interest rates raise the prospect of bad debts and crimp consumer borrowing.

Online gaming company PartyGaming was a major gainer, up 3.1 percent, after a report that it is set to unveil plans to expand into sports betting through acquisitions. The Guardian newspaper said the move would be funded with a bond issue worth up to 500 million pounds.

Oil majors BP and Royal Dutch Shell gained around 1.3 percent each as crude prices climbed further above $72 after falls in U.S. crude and gasoline inventories, raising concerns about fuel supplies.

By 1002 GMT the FTSE 100 was up 67.5 points or 1.2 percent at 5,746.1, its highest since June 6 and well above mid-June's the 6-month lows of 5,467.4 scored on concerns that interest rates would have to spike to contain inflation.

We are responding now dramatically to the vagaries of hype, to base metals and oil prices, that's all the market is about, said David Buik, a market commentator at spread betters Cantor Index.

He added that markets were slowing down as investors waited for the Fed decision and ahead of the quarter and half-year end. Many investors were also distracted by UK summer sporting events such as Wimbledon.

I don't like the low level of volume. It means the market is wholly uncertain, people have got a talk to me in September approach, which is thoroughly unhealthy and I wouldn't be surprised to see volatility on good and bad news, he said.

MINERS HOT

Miners saw Xstrata up 3.1 percent and Rio Tinto 2.8 percent ahead, tracking the overall market higher as copper prices remained solid, although some were jittery that a 50 basis point hike in U.S. interest rates would choke metals demand.

A sharp rate rise would boost the dollar, making dollar-priced commodities more expensive to consumers and investors with other currencies and would slow economic growth which would dampen demand for industrial metals.

Shares in drinks group Diageo were left out of the rally, falling 1.2 percent despite the company saying it expected to report better than expected sales in the year just ending. Traders said the shares fell because of concerns about a slowdown in the United States, currency moves and a lack of room for more broker upgrades.

Food company RHM jumped 8.2 percent after it posted a 10 percent increase in profit at its annual results and said it had achieved its goal of stabilising cake sales after a steep drop last year.

(Additional reporting by Matt Falloon)

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