Britain's top share index was up 1.7 percent at midday on Monday, fuelled by strength in miners and energy stocks thanks to firmer commodity prices, while improved risk appetite also boosted banks.

At 1209 GMT, the FTSE 100 index .FTSE was 90.46 points higher at 5,341.87, having closed 0.3 percent lower on Friday and fallen in the previous three sessions.

The UK blue chip index is up 20.5 percent this year, and has soared more than 50 percent since touching a six year trough in March.

Miners bolstered the recovery as the price of gold powered to a record above $1,160 an ounce on Monday, lifted by a retreating dollar, which also promoted a sharp rise in copper prices.

With no end in sight for the dollar's slump, gold's success looks set to continue pushing the FTSE towards the psychological 5,500 barrier, said Philip Gillett, sales trader at IG Index.

Eurasian Natural Resources (ENRC.L), Randgold Resources (RRS.L), Fresnillo (FRES.L), Lonmin (LMI.L), Xstrata (XTA.L), and Rio Tinto (RIO.L) gained 3.8 to 4.8 percent.

Banking issues, which tend to be beneficiaries of increasing risk appetite, also rose strongly.

Barclays (BARC.L), HSBC (HSBA.L), Standard Chartered (STAN.L) and Royal Bank of Scotland (RBS.L) took on 2.2 to 3.2 percent.

Lloyds Banking Group (LLOY.L) added 2.7 percent after it said it had agreed to swap 8.78 billion pounds (14.5 billion) of bonds as part of a deal aimed at funding its exit from a costly state-backed insurance scheme for bad debts.

Oil majors pushed higher as crude prices CLc1 also benefited from the weaker dollar. BP (BP.L), Royal Dutch Shell (RDSa.L), and BG Group (BG.L) added 0.7 to 1.6 percent.

Tullow Oil (TLW.L) missed out on the gains, however, shedding 0.9 percent as investors assessed the implications of the sale by Heritage Oil (HOIL.L) of its Ugandan operations, in which Tullow is a 50 percent partner.

Mid-cap explorer Heritage reversed earlier gains to shed 5.1 percent as the news of the Ugandan disposal to Italy's Eni (ENI.MI) for up to $1.5 billion was balanced by the ending of merger talks with Turkey's Genel. 

Otherwise, a hotchpotch of defensive issues were among the limited blue chip fallers, with testing equipment firm Intertek (ITRK.L) losing 0.8 percent, packaging firm Bunzl (BNZL.L) shedding 0.5 percent, and outsourcing group Serco (SRP.L) also falling 0.5 percent.

WALL STREET EYED

U.S. stock index futures SPc1, DJc1 pointed to a higher open on Wall Street, recovering after falls on Friday helped by the weak dollar and a rise in crude prices.

A group of U.S. business economists boosted their forecast for economic growth over the next year, but said the jobless rate will remain stubbornly high, a survey released on Monday showed.

The National Association for Business Economists predicted real growth in gross domestic product for 2010 would be 2.9 percent, up from its October forecast for 2.6 percent growth.

Investor attention was also focused on U.S. existing home sales data for October, scheduled for release at 1330 GMT.

According to a Reuters poll of 29 economists, sales of previously owned homes are expected to climb to a seasonally adjusted annual rate of 5.70 million, the fastest pace since 5.73 million units were sold in July 2007 and up from 5.57 million units in September.

Pascal Lamy, director general of the World Trade Organisation, told the Sunday Telegraph that the British government could face trade sanctions if it is found guilty of protectionism as a result of the bank bailout.