* FTSE hits fresh 12 month highs
* Banks up; investors confident on economic recovery
* Miners, oils track higher commodity prices
* UK August Retail sales due at 0830 GMT
By David Brett
LONDON, Sept 17 (Reuters) - Britain's FTSE 100 extended its rally into a fifth consecutive session early on Thursday, led by strength in banks and commodity issues.
At 0815 GMT London's blue chip index was up 0.8 percent, or 40.21 points at 5,164.34. It closed up 82 points, or 1.6 percent higher, at 5,124.13 on Wednesday -- the highest close since late September last year.
"Alternative asset classes (bonds, metals) are deeply unattractive to investors and whilst that remains the case there is no point in deserting equities," said David Buik, a partner at BGC Capital Partners.
Britain's embattled banks again led the charge as investors showed their hunger for riskier equities.
Barclays, Royal Bank of Scotland, Lloyds Banking Group and HSBC rose 1 to 1.4 percent.
Miners gained strength from stronger metals prices with gold remaining firmly above $1,000 an ounce as investors saw demand on the back of a strengthening economy.
Fresnillo, Rio Tinto, Randgold Resources and BHP Billiton gained 0.5 to 3.5 percent.
Antofagasta, up 2.1 percent, was also boosted by an upgrade to "outperform" from Cazenove.
Anglo American, the world's fourth-largest diversified miner added 0.4 percent, as Barclay's Capital raised its rating to "overweight" from "underweight", citing strong metal prices.
Eurasian Natural Resources, bucked the sector trend, down 0.7 percent, after the company confirmed late on Wednesday that it was mulling over a cash bid for CAMEC.
Oil majors raced higher as crude prices ticked up toward $73 a barrel. Royal Dutch Shell, BG Group, BP and Cairn Energy rose between 0.6 and 1.5 percent.
Tullow Oil jumped 3.6 percent, extending recent gains as the company said it made an oil discovery at one of its exploration wells in Uganda.
Among other gainers, British Airways climbed 4 percent after Goldman Sachs added the stock to its Conviction Buy list and hiked its target price for thwe airline.
The airline is interested in UK rival bmi and has spoken with bmi's German owner Lufthansa, the UK flag carrier's Chief Executive Willie Walsh told the Evening Standard.
BALFOUR RIGHTS ISSUE
Balfour Beatty gained 2.1 percent as British construction and engineering group said it is in advanced talks regarding a "significant" acquisition which it expects to fund mostly with a rights issue, it said on Thursday.
DIY retailer Kingfisher gained 2.3 percent after the firm revealed a jump in first-half profits, meeting recently increased forecasts, but cautioned of challenging trading conditions ahead.
On the economic data front, August UK retail sales numbers are due out at 0830 GMT, with the consensus forecast for a monthly increase of 0.2 percent.
Later in the session, US housing starts and weekly jobless claims will also be closely followed as the recovery theme continues.
The FTSE has rallied 21 percent this quarter and is on track to post its best percentage quarterly gains since the index was launched in 1984. But it is still down around 5 percent from a year ago, just before the collapse of Lehman Brothers. (Editing by Hans Peters)