* FTSE up 0.9 percent
* UK banks wobble as Italian banks' shares suspended
* Commods firmer after China, Europe comments
By David Brett
LONDON, June 24 (Reuters) - Britain's top share index pared gains by midday on Friday, as investors' confidence in banks was shaken by the suspension of trading in some lenders in Italy under pressure from Europe's debt crisis.
London's blue-chip index remained in positive territory, up 51.56 points, or 0.9 percent at 5,725.94 by 1120 GMT, rebounding from three-month closing lows on Thursday, but off its session high of 5,768.54.
Lloyds Banking Group , Barclays and RBS fell as much as 2.5 percent after shares of Italy's UniCredit and Intesa Sanpaolo were temporarily halted following volatile trading.
The reason for the sudden drop in bank shares remained unclear but traders pointed to comments from central bankers and regulators over Europe's debt crisis, and European Union bank stress tests causing anxiety among investors.
"We have still got a lot of nervousness about not only Italian banks' exposure but in general about European banks' exposure to the sovereign debt crisis," Michael Hewson, market analyst at CMC Markets.
"Investors are understandably nervous about where this is going to end and the moment it has still got quite some way to go."
Britain's new risk watchdog warned the euro zone's debt crisis poses the biggest threat to Britain's financial stability and banks must come clean on their full exposure.
COMMODS HOLD GAINS
Miners and integrated oil stocks , top fallers in the previous session, remained firmly in positive territory after comments overnight in Europe and China temporarily calmed investors' nerves.
Late on Thursday, Greece reached an agreement with EU and IMF leaders on additional tax hikes and spending cuts to plug a 3.8 billion euro funding gap, paving the way for the disbursal of a much-needed aid package in July.
"That an agreement has now been reached appears to be a short-term positive for the market, although the fact that it must be put to a vote next week should ensure that markets continue to trade nervously over the next few sessions," Bill McNamara, a technical analyst at Charles Stanley, said.
He said from a technical standpoint the good news through all of the turbulence is that the FTSE has not broken down through the "last support" at around the 5,640-level.
Soothing worries over global growth, Chinese Premier Wen Jiabao was quoted by the Financial Times as saying he was confident price rises, which have been blamed for spiralling inflation and stifling the global economic recovery, would be kept firmly under control this year, giving players a reason cover short positions.
Chip designer Arm Holdings gained 3 percent after results from Oracle and Accenture , which Panmure Gordon said suggested continued good growth in large enterprise IT investment and was supportive of the UK sector overall.
British industrial and engineering group GKN added 4.4 percent as sentiment in the sector was boosted after better-than-expected sales performances by some global auto makers in China.
U.S. stock index futures pointed to gains for Wall Street on Friday, rebounding after Thursday's losses, ahead of U.S. data, with the final reading for first-quarter growth and May durable goods both due at 1230 GMT. (Editing by Erica Billingham)
* For related prices, Reuters Terminal users may click on * UK stock report FTSE index: <0#.FTS6> techMARK 100 index: FTSE futures: <0#FFI:> Gilt futures: <0#FLG:> Smallcap index: FTSE 250 index: FTSE 350 index: Market digest: Top 10 by vol: Top price gainers: Top % gainers: Top price losers: Top % losers: * For related news, click on - * UK hot stocks: [HOT&GB] Wall Street: Gilts report: Euro bond report Pan European stock report: Tokyo stocks: HK stocks: Sterling report: Dollar report: * For company prices, click on - * Company directory: By sector: * For pan-European market data and news, click on - * Daily European stocks report........................ European Equities speed guide................ FTSE Eurofirst 300 index......................... DJ STOXX index................................... Top 10 STOXX sectors........................ Top 10 EUROSTOXX sectors................... Top 10 Eurotop 300 sectors.................. Top 25 European pct gainers.................... Top 25 European pct losers.....................