* FTSE 100 index up 1.7 percent, back above 5,600 level
* Banks bounce back after sell-off on European debt worries
* Commods lifted by stronger metal prices after China data
By Jon Hopkins
LONDON, Dec 1 (Reuters) - Britain's leading share index pushed higher at midday on Wednesday, boosted by a recovery in financial issues and strength in commodity issues as stronger than expected Chinese data offset ongoing European debt worries.
At 1154 GMT, the FTSE 100 index was 92.84 points, or 1.7 percent higher at 5,621.11, rallying on the first session of the final month of 2010, having ended November back at levels not seen since mid-September.
"It certainly looks like there has been a base put under the market. Ultimately I think the stage has been set for the market to move higher although uncertainty will keep something of a lid on it," said Yusef Heusen, senior sales trader at IG Index.
Banks were the best sectorial performers, rallying after a sharp sell-off in recent sessions caused by ongoing concerns over European debt contagion.
Part-nationalised British banks Royal Bank of Scotland and Lloyds Banking Group were the best off, up 5.1 percent and 4.7 percent, respectively.
Insurers, which have also suffered in the past few sessions as financial stocks got cold-shouldered, rallied too, led by Prudential, the top FTSE 100 riser, up 5.9 percent.
Prudential aims to double the value of its new business profits in Asia by 2013, taking advantage of the region's low penetration rates, the company said.
Miners moved higher as metal prices rose after data from China showed the world's biggest commodity consumer had revved up production in November by more than expected.
Xstrata was the best sector performer, ahead 4.5 percent, helped by a target price hike from Barclays Capital.
Energy issues also showed strength as the crude price moved higher, with BP up 1.5 percent.
Sage Group was a strong blue chip gainer, up 5.6 percent after the software firm posted a 14 percent rise in full-year profit, broadly in line with expectations, prompting Panmure Gordon to raises its target price.
DEFENSE DISHED
BAE Systems was among the top blue-chip fallers, down 1.2 percent as Goldman Sachs' reiterated its "conviction sell" rating on the stock in a bearish defence sector note.
"Many defence companies now say they do not expect growth in all, or major segments, of the U.S. defence market in 2011," said Goldman Sachs in its note to clients.
British defense peer Cobham also suffered, losing 0.6 percent after Execution Noble cut its rating to "hold" from "buy" on valuation grounds.
Ex-dividend factors accounted for the top two FTSE 100 fallers, Severn Trent and National Grid, while Land Securities and Johnson Matthey also lost their payout attractions on Wednesday.
On the macro front, British manufacturing activity rose unexpectedly to a 16-year high in November, with the Markit/CIPS manufacturing PMI reading of 58.0, well above the 54.6 expected, with October's reading revised up to 55.4..
Meanwhile, mortgage lender Nationwide said the average price of a British property fell 0.3 percent in November, a slightly bigger drop than the 0.2 percent fall forecast. (Editing by Hans Peters)