* FTSE 100 index sheds 0.7 percent
* Miners fall after surprise Chinese interest rate hike
* Banks higher after results from U.S peers
By Jon Hopkins
LONDON, Oct 19 (Reuters) - China's first interest rate rise since 2007 hit mining shares and dragged Britain's leading share index lower on Tuesday, offsetting gains from banks after solid results from Bank of America and Goldman Sachs.
At the close, the FTSE 100 index was down 38.63 points, or 0.7 percent at 5,703.89, having earlier dipped below the 5,700 level to a session low of 5,690.58.
"Miners put the skids under the FTSE, dropping after the China rate move designed to rein in its booming economy, but the underlying mood is not too bad with banks seeing support and volumes fairly solid," said Mic Mills, head of electronic trading at ETX Capital.
Metal prices fell on concerns demand might weaken after China's central bank said it will raise its benchmark one-year lending and deposit rate by 25 basis points effective from Oct. 20. Silver miner Fresnillo was the top blue chip faller, down 5.3 percent, while Xstrata shed 4.4 percent, also pressured by mixed third-quarter production figures for its two key products.
Energy stocks were weighed down by a 2 percent drop in the price of crude oil, with BG Group and Royal Dutch Shell down 0.7 percent and 1 percent respectively.
Banks, however, found modest gains after above-forecast earnings from BofA Merrill Lynch and Goldman Sachs numbers from Monday.
Standard Chartered rose the most, up 2 percent having announcing a cash call to enhance its balance sheet last week, while majority state-owned Royal Bank of Scotland added 1.4 percent, and HSBC gained 0.1 percent.
DEFENSIVES SOUGHT
Defensive issues found support as investors sought safer havens, with drinks group Diageo the top FTSE 100 riser, up 2.5 percent, while utilities Severn Trent and National Grid both gained 1.3 percent.
Hotels to coffee shops operator Whitbread added 2.1 percent after posting first-half results at the top end of market expectations..
Software firm Autonomy was among the big gainers, up 1.8 percent after it said with third-quarter results that demand for its products remained strong and it could still beat expectations for 2011.
Both Numis and Panmure Gordon upgraded ratings for Autonomy in the wake of the numbers, with Panmure having downgraded after the firm cut its full-year revenue view earlier this month.
But tech peer ARM Holdings shed 2.6 percent after Apple, which uses its chips, disappointed investors late on Monday with weaker-than-expected gross margins and iPad shipments.
U.S. blue chips were 0.9 percent lower by London's close knocked by weak tech issues, led by Apple and IBM after their results.
Investors failed to draw support from an unexpected rise in U.S. housing starts in September to a five-month high.
Among domestic news, British factory orders fell at their sharpest pace since April, the CBI's October industrial trends survey showed on Tuesday.
(Editing by Elaine Hardcastle)