FTSE rebounds on commods as RBS, HBOS sink 40 pct

* FTSE 100 ends up 0.4 pct

* Banks thrashed on funding concerns

* Commodity stocks gain on firmer metal and crude prices (For full coverage of financial turmoil, click on [nCRISIS])

By Dominic Lau

LONDON, Oct 7 (Reuters) - Britain's leading share index rebounded on Tuesday after posting its biggest-ever one-day points fall in the previous session, as gains in commodity stocks offset heavy losses in the ailing banking sector.

The FTSE 100 .FTSE closed 16 points, or 0.4 percent, higher at 4,605.2 points in a volatile session, after swinging from a low of 4,517.5 to a high of 4,745.

But UK banks, with Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz) hitting a 15-year closing low, remained deeply in the red on funding concerns, though markets received a boost from the U.S Federal Reserve's announcement of a special-purpose facility to buy commercial paper.

The UK benchmark lost 7.85 percent to hit a four-year low on Monday. The index is down 28.7 percent for the year.

Heavyweight energy stocks gained along with higher crude prices CLc1. BP (BP.L: Quote, Profile, Research, Stock Buzz), Royal Dutch Shell (RDSa.L: Quote, Profile, Research, Stock Buzz) and BG Group (BG.L: Quote, Profile, Research, Stock Buzz) soared 2.9 to 4.6 percent.

Strong metal prices also lifted mining shares, with BHP Billiton (BLT.L: Quote, Profile, Research, Stock Buzz), Rio Tinto (RIO.L: Quote, Profile, Research, Stock Buzz), Anglo American (AAL.L: Quote, Profile, Research, Stock Buzz), Eurasian Natural Resources (ENRC.L: Quote, Profile, Research, Stock Buzz), Vedanta Resources (VED.L: Quote, Profile, Research, Stock Buzz) and Antofagasta (ANTO.L: Quote, Profile, Research, Stock Buzz) rising between 1 and 11 percent.

The Fed announced the creation of a special-purpose facility with the Treasury Department's blessing to begin buying commercial paper, which is widely issued to fund day-to-day business operations, as other investors have become increasingly reluctant to buy them.

Banks were the top-weighted losers on the FTSE 100, adding to Monday's heavy losses [ID:nL719996]. The FTSE 350 banks index .FTNMX8350 sagged 7.3 percent.

"Again, it's all about the banks. It's the uncertainty created this morning with the rumour about meeting with the government ... to bail out the banks," said David Jones, chief market strategist at IG Index. "The rest of the market has found a bit of a firmer footing."

"With the Wall Street fairy stable, people may be pinning their hopes on something of a recovery. The level that people want to see broken is probably going to be probably yesterday's high of 4,800."

News that Finance Minister Alistair Darling met bank officials on Monday evening sent shares in major banks sharply lower as investors feared their holdings might be diluted by a big government stake.

Bank officials, however, were dismissed suggestions they had asked for money.  Continued...