* FTSE climbs 0.2 percent
* Banks rally after earlier falls on Japan downgrade
* Miners firm; Randgold buoyed by HSBC upgrade
By Tricia Wright
LONDON, Jan 27 (Reuters) - Miners helped Britain's top share index edge higher on Thursday, boosted by firmer metals prices, and as banks staged a slight recovery after falls earlier in the session.
By 1223 GMT, the FTSE 100 was up 10.31 points, or 0.2 percent, at 5,979.52, having added 0.9 percent in the previous session.
Miners tracked metals prices higher, with Randgold Resources among the top blue-chip risers, up 4.4 percent with the extra help of an HSBC rating upgrade to "overweight" from "neutral".
Sentiment surrounding the sector was lifted as a flurry of production updates coincided with upbeat comments from Citi, recommending investors re-enter the sector as mining stocks have underperformed metal prices this year.
Traders said the U.S. Federal Reserve's decision to maintain a $600 billion bond-buying programme also helped sentiment.
"Most of the swell in asset prices, particularly from commodities, has come from liquidity from QE2 (the second round of quantitative easing), and the indications from the Fed last night is that they will continue to support," said Joshua Raymond, market strategist at City Index.
Banks bounced off early-session lows that were prompted by a cut in Japan's credit rating by Standard & Poors.
"People are already buying into them and using the dips as a buying opportunity, which shows that investors are largely shrugging off the Japan credit rating cut," Raymond said.
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British high street issues were out of favour after Swedish budget fashion chain Hennes & Mauritz posted a surprise fall in fourth-quarter profit.
Next topped the blue-chip fallers' list, off 2.1 percent, while Marks & Spencer slipped 0.6 percent.
Retailers have been unsettled by a Christmas trading period hurt by bad weather conditions and a shock drop in British fourth-quarter GDP, while the impact of the UK government's austerity measures have still to be fully felt.
Elsewhere, bid target BSkyB rose 1.9 percent as strong demand for broadband lifted first-half profits at the media firm, which analysts said will put pressure on majority shareholder Rupert Murdoch's News Corp to lift its offer for the group.
Satellite operator Inmarsat extended the previous session's gains, climbing 1.9 percent, as S&P Equity Research raised its rating on the firm to "buy" from "hold", following reports on Wednesday surrounding its deal with LightSquared.
Drugmaker AstraZeneca added 1.2 percent as it announced a $4 billion share buyback and forecast-beating fourth quarter earnings, helped by growing sales of its cholesterol drug Crestor and schizophrenia medicine Seroquel.
U.S. stock index futures pointed to a flat to firmer start on Wall Street on Thursday, ahead of U.S. December durable goods orders, the latest weekly jobless claims and December pending home sales. (Editing by Will Waterman)