FTSE soars as battered banks, commodities rebound

* FTSE 100 rises 2.6 pct * Beaten-down banks and commodity stocks rebound

* Defensive stocks like tobacco and utilities weaken (For more the financial crisis, click on [nCRISIS])

By Dominic Lau

LONDON, Oct 9 (Reuters) - Britain's leading share index surged 2.6 percent early on Thursday, recovering some of the previous session's hefty losses, as beaten-down banks and commodity stocks rebounded.

By 0753 GMT, the FTSE 100 .FTSE was up 114.0 points at 4,480.7, after tumbling 5.2 percent on Wednesday to its lowest close in over four years, shrugging off UK government's rescue deal and coordinated rate cuts by top central banks.

The UK benchmark is still down 30 percent this year.

Banks rose, with the FTSE 350 banks index .FTNMX8350 up 3.4 percent. Citigroup said it had raised UK banks to "neutral" from "underweight" after their underperformance and the government's rescue plan as well as coordinated rate cuts from major central banks.

Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz), Lloyds TSB (LLOY.L: Quote, Profile, Research, Stock Buzz) and HBOS (HBOS.L: Quote, Profile, Research, Stock Buzz) were up between 10.5 and 25.2 percent. But HSBC (HSBA.L: Quote, Profile, Research, Stock Buzz) slipped 0.4 percent.

Barclays (BARC.L: Quote, Profile, Research, Stock Buzz) was flat after the Daily Mail said the bank is hatching a plan to bolster its capital base by 3 billion pounds ($5.17 billion) by offering existing investors first refusal on preference shares before seeking cash from the government's rescue fund.

"There is slight enthusiasm for more ... capricious stocks against defensive stocks at the moment. It's a good signal but the real clue will be from how convinced they are and what they are going to say at the G7 meeting," said Stephen Pope, chief global market strategist at Cantor Fitzgerald Europe.

Financial ministers and central bank chiefs from the G7 countries will meet in Washington on Friday.

"I would expect that where you can find them, make short-term gains, where you can, make some profits and try to book those very quickly. I wouldn't expect gains to be long-lived," Pope said.

He said the trick of the market would be to keep a close eyes on U.S. futures, which were up 1.8 to 2.2 percent.

Aviva (AV.L: Quote, Profile, Research, Stock Buzz) surged 7.9 percent after the insurer said it had reinforced its buffer against slumping stock markets through increased hedges.

U.S. stocks fell for the sixth straight session on Wednesday, as a coordinated worldwide cut in interest rates failed to alleviate fears about a global recession. In Asia, Japan's Nikkei average .N225 down 0.5 percent, reversing earlier gains.  Continued...