FTSE hits 1-month high as China move lifts mood

LONDON (Reuters) - Britain's top share index pushed higher early on Monday as a move by China to let the yuan rise brightened the demand outlook for commodities and improved investor's risk appetite, powering gains in miners and banks.

By 3:57 a.m. ET, the FTSE 100 .FTSE was 61.60 points, or 1.2 percent higher at 5,312.44, having touched its highest level in a month after it closed 0.1 percent lower on Friday which snapped a seven day winning run.

The index is up 2.6 percent this month after sharp falls in April and May, as fears on Europe's debt problems have receded.

China's central bank said late on Saturday it was ready to make the yuan more flexible, citing a global economic recovery and more balanced external trade.

This prompted buying of riskier assets, with Asian stocks gaining broadly, while metal prices firmed and crude rose to around $79 per barrel as investors grew more confident about China's role in the economic recovery.

Miners had the biggest impact on the index, with BHP Billiton (BLT.L) and Rio Tinto (RIO.L) gaining 4.3 and 5.3 percent respectively.

"China's flexibility comment has shown that it has confidence in its own economy and that is good news for the global economy, which is lifting commodity prices and therefore miners," said Richard Hunter, head of equities at Hargreaves Lansdown.

Energy stocks were mostly up in-line with the index, but BP (BP.L) fell 3.6 percent as investors fretted once again about the mounting costs faced by the energy giant from the massive oil spill in the Gulf of Mexico.

Banks, which tend to move in tandem with investor's appetite for risk, were firmly higher, with sector heavyweight HSBC (HSBA.L) gaining 1.9 percent.

And there were solid gains across the board, with even defensive stocks, which saw some weakness on Friday, participating in the rally. British American Tobacco (BATS.L) added 0.7 percent while food producer Unilever (ULVR.L) gained 1.7 percent.

Investors were looking ahead to Tuesday's first, emergency budget from the Britain's coalition government, with finance minister George Osborne set to deliver what is likely to be the tightest budget in at least 30 years.

Data offered tentative cause for optimism. Asking prices for British homes in June were 5 percent higher than a year ago, up from a 4.3 percent annualized gain in May, property website Rightmove said on Monday, but it said the market's recovery could stall this year.

No other domestic data is due for release, and no U.S. data is due for release on Monday either, with investors likely to focus on the latest two-day Federal Reserve rate-setting meeting, the outcome of which is due to be announced after the London close on Wednesday.

(Editing by Jon Loades-Carter)