FTSE Up 1.2% At Midday; Banks, Insurers Up

Britain's top share index added 1.2 percent by midday on Thursday, lifted by strength in financials which were bolstered by government measures to support Royal Bank of Scotland, but retreating energy stocks capped gains.

By 1159 GMT, the FTSE 100 index was 44.36 points higher at 3,893.34, having closed up 32.54 points, or 0.9 percent on Wednesday after snapping a four-day losing streak.

But the index retreated from the day's high of 3,948.98.

"Some of the early rush of euphoria on banking news has been given back. Markets are still very nervous even though things are looking better for the banking sector," said David Jones, chief strategist at spread betters IG Index.

Banks were far and away the biggest blue chip gainers.

Royal Bank of Scotland leapt 23.8 percent higher as the firm reported a loss of 24.1 billion pounds ($34.3 billion) for 2008, the biggest in British corporate history and said it planned to place 325 billion pounds in assets in a state insurance scheme.

"The favourable pricing of the asset protection scheme, along with the additional capital injection from the government, will remove the immediate capital concerns about RBS," Panmure Gordon analyst Sandy Chen wrote in a note to clients.

Lloyds Banking Group, which releases full-year results on Friday and will also unveil plans to participate in the government's asset scheme, added 25.4 percent.

Barclays added 8.3 percent, HSBC firmed 6.6 percent and Standard Chartered was up 3.3 percent.

Insurers were also in demand, with RSA Insurance gaining 11.5 percent after it posted a 7 percent rise in its 2008 operating profit, ahead of market expectations, and hiked its dividend by 10 percent.

Peer Legal & General took on 16.1 percent. The insurer is planning to cut between 250 and 450 jobs, or up to 5 percent of its workforce, in response in changing business demand, the BBC reported.

Prudential, Aviva, Friends Provident and Old Mutual gained between 3.9 and 10.1 percent.

Miners recovered after recent falls, with Rio Tinto, BHP Billiton, Anglo American and Xstrata up between 0.8 and 3.7 percent.

OILS FLOW DOWNSTREAM

Energy issues, however, ran out of steam after a recent rally, although the crude price gained ground. BP, BG Group, Royal Dutch Shell, Cairn Energy and Tullow Oil lost between 0.4 and 1.7 percent.

BG Group has acquired a 29 percent stake in Australian coal seam gas producer Pure Energy Resources Ltd, Pure said in a statement on Thursday.

Heavyweight drug blue chips also fell back as their defensive attractions faded, with AstraZeneca and GlaxoSmithKline down 0.4 and 0.6 percent respectively.

"Obviously a number of questions still remain about the weakness of the wider economy ... it could well be seeing something of a bear market rally today rather than anything sustainable," said Richard Hunter, market strategist at Hargreaves Lansdowne.

British house prices fell by a bigger-than-expected 1.8 percent in February for a record annual decline of 17.6 percent, figures from mortgage lender Nationwide showed on Thursday.