European stocks tick up as financials rebound

* FTSEurofirst up 0.4 percent

* Banks, insurers rebound after heavy losses

* Oil hovers around $121, geopolitical risk grows

By Sitaraman Shankar

LONDON, Aug 22 (Reuters) - European shares rose by mid-morning on Friday, boosted by a rebound in battered financial stocks, but a robust crude price kept a lid on gains.

At 0900 GMT, the FTSEurofirst 300 index of top European shares gained 0.4 percent to 1,159.75 points after enduring a choppy morning.

Royal Bank of Scotland added most points to the index with a 2.9 percent gain, while BNP Paribas , HSBC , UBS and Santander notched up gains of 0.7-2.7 percent.

Oil CLc1 hovered around $121, a day after its biggest jump in 3 months on mounting tension between the United States and Russia.

Russia, the world's second largest oil exporter, said on Thursday that it would respond with more than just a diplomatic protest to a U.S. deal with Poland to station parts of a U.S. missile defence shield on Polish soil.

"Investors are realising that the bear has put its paw on the pipeline, and geopolitical risk is likely to remain a theme for the next month or so," said Justin Urquhart Stewart, investment director at Seven Investment Management.

The uncertainty kept oil shares volatile, with heavyweights trading down after an initial rise. Total took most points off the index with a 1.5 percent fall, while BP fell 1 percent.

Miner Rio Tinto underperformed after Australia's competition regulator said it had deferred its final decision on an around $128 billion bid by miner BHP Billiton Ltd for Rio.

Rio reversed early losses to tick up 0.3 percent and BHP gained 1 percent.

Britain's FTSE 100 .FTSE was up 0.9 percent, Germany's DAX .GDAXI up 0.6 percent and France's CAC .FCHI up 0.5 percent.

M&A LIFTS INSURERS, BERNANKE EYED

Aon Corp , one of the world's largest insurance brokers, made a recommended cash offer for Benfield that valued the UK-listed broker at 844 million pounds.

Benfield stock rose nearly 30 percent. Prudential gained 3.8 percent and Axa rose 1.5 percent.

Investor focus shifts to a speech on financial stability later in the day from Federal Reserve Chairman Ben Bernanke at the Federal Reserve Bank of Kansas Economic Symposium.

"Bernanke will have to come up with some cuddly words to negate some of the hyperbole of (former IMF chief economist Kenneth) Rogoff," said Seven Investment's Urquhart Stewart.

Rogoff said on Tuesday that the worst of the global financial crisis was yet to come and a large U.S. bank would fail in the next few months as the world's biggest economy hits more trouble.

Global equities have taken a battering over the past year due to the credit crisis originating in the U.S. subprime mortgage market, which has driven banks to make large writedowns on investments and slowed the global economy.

The FTSEurofirst 300 is down 23 percent so far this year, and on track in August for its ninth month of losses in the last 10.

Underlining investor concerns, revised official data showed Britain's economy unexpectedly ground to a halt in the second quarter, its weakest performance since the recession of the early 1990s.

Euro zone June industry orders were down by 0.3 percent month on month. (Editing by Paul Bolding)