Commodity stocks lead FTSE higher after China data

A dealer monitors her screens on the trading floor of IG Index in London May 6, 2010.

LONDON (Reuters) - Strength in heavyweight commodity stocks and banks lifted the top share index on Friday, as investors' risk appetite returned after second-quarter growth rates in China slowed, fuelling expectations for more stimulus moves.

The FTSE 100 .FTSE closed up 57.88 points, or 1.0 percent, at 5,666.13, regaining all of the previous session's drop to end a volatile week almost where it started on Monday at 5,662.

"It's still a bit of an uncertain market place, and the FTSE is reflecting this, being up one day and down the next," said Paul Mumford, a portfolio manager at Cavendish Asset Management.

Volume was low at 66 percent of the 90-day daily average.

Miners .FTNMX1770 and energy stocks .FTNMX0530 bounced back after falls on Thursday, rallying in line with firmer crude and copper prices after weak but in-line Q2 GDP from top commodities consumer China.

The growth rate, following on from a big batch of other Chinese economic pointers this week, slowed for a sixth successive quarter, prompting talk of possible further economic stimulus from Beijing, though it also suggested that action taken so far was beginning to stabilise the economy.

"The raft of macro data points announced from China (this week), along with the progression of the Q2 earnings season, is likely to dictate the market mood over the next week or so," said Simon Reynolds, a fund manager for Octopus Investment's Multi Manager team.

"We maintain our view that the current rallies in risk assets are unsustainable, while nothing has changed significantly at a macro level, but continuing to capitalize on the trading opportunities that they create on the periphery of the portfolios," Octopus' Reynolds added.

U.S. blue chips .DJI were up 1.3 percent by London's close, rallying after falls the previous session, on the China data relief, with Friday's U.S. economic pointers mixed.

Bank shares rose on Wall Street as JPMorgan Chase & Co (JPM.N) and Wells Fargo (WFC.N) kicked off the U.S. sector reporting season with well-received second-quarter earnings.

BANKS UP

British banks .FTNMX8350 were higher as a sector, benefiting from the earnings news from their U.S. peers, but ongoing worries over the euro zone debt crisis capped gains.

Italian 10-year government bond yields rose Friday, seeing little respite from a solid debt auction as a surprise ratings cut by Moody's highlighted the risk that the euro zone's third biggest economy could eventually fall victim to the debt crisis.

Barclays (BARC.L) bucked the firmer sector trend, losing 0.8 percent as the Libor-rate fixing scandal-hit bank continued to be shunned by investors as further revelations came to light.

The New York Fed, the U.S. central bank's eyes and ears on Wall Street, said an analyst with its Markets Group was told by an employee at Barclays in April 2008 that the bank was under-reporting its borrowing costs for the purposes of setting a global interest rate benchmark.

The Barclays employee told the New York Fed that he believed other banks were doing the same, the regional Fed bank said.

Among other blue chip fallers, selected defensive stocks were under pressure as investors' appetite for riskier returned.

Broker comment blighted some, with Scottish & Southern Energy (SSE.L) shedding 0.9 percent as Citigroup downgraded its rating to "sell" from "neutral".

(Reporting by Jon Hopkins; Editing by Hugh Lawson)