FTSE rebounds on commodities

By Dominic Lau

LONDON (Reuters) - The leading share index rebounded on Tuesday after posting its biggest-ever one-day points fall in the previous session, as gains in commodity stocks offset heavy losses in the ailing banking sector.

The FTSE 100 closed 16 points, or 0.4 percent, higher at 4,605.2 points in a volatile session, after swinging from a low of 4,517.5 to a high of 4,745.

But UK banks, with Royal Bank of Scotland hitting a 15-year closing low, remained deeply in the red on funding concerns, though markets received a boost from the U.S. Federal Reserve's announcement of a special-purpose facility to buy commercial paper.

The UK benchmark lost 7.85 percent to hit a four-year low on Monday. The index is down 28.7 percent for the year.

Heavyweight energy stocks gained along with higher crude prices. BP, Royal Dutch Shell and BG Group soared 2.9 to 4.6 percent.

Strong metal prices also lifted mining shares, with BHP Billiton, Rio Tinto, Anglo American, Eurasian Natural Resources, Vedanta Resources and Antofagasta rising between 1 and 11 percent.

The Fed announced the creation of a special-purpose facility with the Treasury Department's blessing to begin buying commercial paper, which is widely issued to fund day-to-day business operations, as other investors have become increasingly reluctant to buy them.

"Again, it's all about the banks. It's the uncertainty created this morning with the rumour about meeting with the government ... to bail out the banks," said David Jones, chief market strategist at IG Index. "The rest of the market has found a bit of a firmer footing."