FTSE up 0.2% awaiting US data; miners, banks rally

* Miners, oils rally with firmer commodity prices

* Banks gain on first anniversary of Lehman Bros collapse

* U.S. retail sales numbers awaited; UK inflation ignored

By Jon Hopkins

LONDON, Sept 15 (Reuters) - Britain's top share index was 0.2 percent higher at midday on Tuesday, lifted by a rally from miners and banks, with vague bid rumours, broker comment and the wait for U.S. retail sales data providing a focus.

By 1117 GMT the FTSE 100 <.FTSE> was 10.32 points higher at 5,029.17, ahead for a third straight session.

"(Monday's) rally towards the close from trading lows is enough to breed confidence that there is not an immediate will for prices to fall, but equities are struggling at the moment to find reasons to push on from these levels," said Josh Raymond, Market Strategist at City Index.

Miners were the biggest driver for the market's gain as metal prices rebounded from the previous session's lows. Fresnillo , Rio Tinto , Xstrata , BHP Billiton and Kazakhmys added 0.3-2.6 percent.

Banks were mostly higher with Royal Bank of Scotland , Lloyds Banking Group , and HSBC up 0.3 to 2.5 percent, although Barclays slipped 0.1 percent and Standard Chartered also fell 0.1 percent as investors mulled comments from Bank of England Governor Mervyn King.

British interest rate futures rallied and sterling fell after King said the central bank was looking at reducing the remuneration rate on commercial bank reserves.

Such an option, first discussed at the BoE's August press conference, would provide a disincentive for banks to hoard cash with the central bank, encouraging them to lend to the private sector.

Oil majors were mostly higher as crude prices moved moved $69 a barrel.

BP was off 0.5 percent, but Royal Dutch Shell moved 0.3 percent higher, and BG Group added 1.6 percent after unveiling another discovery in the Santos Basin concession, offshore Brazil. [ID:nWLA3305]

Oil and gas explorer Tullow Oil , up 3.4 percent also got an additional boost from bid speculation, with market chatter mentioning Italian ENI as a possible predator. Neither company commented on the rumour.

Vague takeover talk also fuelled gains in International Power , up 5.6 percent, with the stock highlighted as a possible bid candidate on Monday, while Man Group firmed 3.3 percent on rehashed bid rumours.

BROKER COMMENT EYED

BT Group was up 3.5 percent, buoyed by a Credit Suisse upgrade to 'outperform' from 'neutral', while precious metals and chemicals firm Johnson Matthey gained 3.4 percent following a Goldman Sachs upgrade.

Rexam was the top blue-chip faller, down 3.3 percent after Credit Suisse removed the stock from its Focus List, and technology firm Smiths Group shed 1.7 percent after Morgan Stanley cut its rating to 'equal-weight'.

U.S. blue-chip futures pointed to a weaker start on Wall Street as investors awaited U.S. PPI and retail sales data for further evidence of a recovery across the Atlantic.

"If we see an upsurge in U.S. retail sales we could see investors return to the markets quickly and positively," said Raymond.

Investors showed little reaction to news British consumer price inflation rose 0.4 percent in August to give an annual reading of 1.6 percent. the lowest since January 2005 but above expectations for a sharper easing to 1.4 percent from 1.8 percent in July. [nLF386677]

Other data, released overnight, showed house prices in England and Wales on a rising track for the first time in more than two years, as measured by the Royal Institution of Chartered Surveyors. [ID:nLAG003751] The FTSE 100 index is up 45 percent since touching its March lows, and closed at a near-one-year high on Monday at 5,018.85. However, the FTSE is still 7.3 percent below the level it was before the collapse of Lehman Brothers a year ago. (Editing by Dan Lalor)