* FTSE 100 index up 0.1 percent
* Commods lifted by demand hopes after U.S. data
* Banks up after Basel III deal boost
By Jon Hopkins
LONDON, Sept 14 (Reuters) - Britain's leading shares edged higher on Tuesday, matching modest gains on Wall Street following above-forecast U.S. retail sales data, with commodity issues standing out.
At the close, the FTSE 100 index was up 1.88 points, or 0.1 percent, at 5,567.41, marginally extending Monday's four-month closing high.
"The last-minute push higher by bulls gives further evidence that investors are hungry for risk and with five gains on the trot now, the market looks stronger and stronger as volumes pick up again after the summer break," said Angus Campbell, head of sales at Capital Spreads.
Heavyweight miners posted the best gains, with Randgold Resources and Fresnillo up 2.8 percent and 2.6 percent respectively, as gold hit a record high and copper pared losses as better-than-expected U.S. retail sales data boosted demand expectations.
Crude prices also benefited oil issues, with Essar Energy the top FTSE 100 gainer, up 3.8 percent.
U.S. blue chips were 0.3 percent higher by London's close, with the above-forecast August retail sales numbers helping allay fears over a double-dip recession.
Meanwhile, British inflation defied expectations of a fall in August and held steady at the level that last month forced the Bank of England to write a public letter to explain why prices were rising so fast.
Among individual gainers in London, outsourcing group Capita added 2.9 percent, while midcap peer Logica rose 4.7 percent as Capgemini UK initialled a deal with the UK government which reassured investors about public sector contracts.
Defence group Cobham was another good gainer, up 2.0 percent after Credit Suisse upgraded its rating on the stock to "outperform" from "neutral", saying it has increased its earnings per share estimate for 2010.
ARM WEAK
ARM Holdings was the top individual FTSE 100 faller, losing 4.0 percent after the chip maker said directors and executives of the company sold shares on Friday and Monday.
Traders also noted fading bid speculation for ARM, with U.S. rival Intel, which has previously been mentioned as a possible bidder, having said it plans no further acquisitions in the short term.
Elsewhere, TUI Travel shed 1.8 percent, after BofA Merrill Lynch cut its rating for the tour operator to "neutral" from "buy" and reduced its target price to 230 pence from 270 pence in a review of the European travel sector.
Broker comment also hit Next, down 2.1 percent after Societe Generale cut its rating on the fashion chain to "sell" from "hold" ahead of first-half results duw on Wednesday.
And fellow retailer Home Retail Group lost 1.5 percent after Nomura cut its stance to "reduce" from "hold".
Defensively-perceived tobaccos were the worst performing blue chips as a sector, with Imperial Tobacco falling 0.6 percent, while British American Tobacco lost 0.8 percent.
(Editing by David Cowell)