FTSE up as banks and miners hold firm

By Jon Hopkins

LONDON (Reuters) - The leading share index .FTSE was up 1.5 percent at midday on Wednesday, just off earlier highs on expectations for an opening retreat on Wall Street before a U.S. Senate vote on a new version of the bank bailout bill.

At 12:35 p.m., the FTSE 100 index was 81.2 points higher at 4,983.7, just below the session peak of 4.994.7 and having hit a low of 4,902.

HBOS HBOS.L surged back after big falls on Tuesday, gaining 27 percent as fears abated that Lloyds TSB (LLOY.L) is looking to renegotiate its rescue takeover of the bank.

Standard Life (SL.L), a major shareholder of both HBOS and Lloyds, is supportive of the planned takeover on its original terms, according to industry sources. Lloyds was up 17 percent.

"After the huge bounce last night (on Wall Street), there is wide talk of a dead-cat bounce in the market, and that the volatility by no means is over yet, " said Tom Hougaard, Chief Market Strategist at City Index.

"My view is that the market is groping for a bottom, and I like to stick my toes in the water and buy some of the beaten names across sectors. However, I know I am trading against the trend, and new lows could be around the corner. I think my sentiment is reflected in the market, which is why we are not thundering higher this morning," Hougaard added.

U.S. stock index futures were weaker pointing to a dull start across the Atlantic, with the leading indexes having risen about 5 percent on Tuesday in a rebound following's Monday's record plunges.

All eyes remained focussed on the path ahead for the revamped $700 billion (392 billion pounds) U.S. bank bailout package, though fundamentals could also play a role with the ADP Payroll survey, a precursor to Friday's September non-farm payrolls, and manufacturing ISM data due for release, according to Matt Buckland, a dealer at CMC Markets.