FTSE rises early as Vodafone, oils, banks rebound

* FTSE 100 rises 0.7 pct early

* Vodafone, banks and energy stocks rebound

* Miners down on growing fears of slowing demand

By Dominic Lau

LONDON, Oct 23 (Reuters) - Britain's top share index edged higher early on Thursday, snapping a two-day losing run, as heavyweight Vodafone (VOD.L: Quote, Profile, Research, Stock Buzz), banks and energy stocks rebounded, offsetting gloom in miners amid growing fears of slowing demand.

By 0757 GMT, the FTSE 100 .FTSE was up 26.08 points, or 0.7 percent at 4,066.97 in a volatile session after falling as much as 1 percent. The UK benchmark had fallen 5.6 percent in the previous two sessions, and is down nearly 37 percent for the year.

Vodafone bounced 3.7 percent after losing 7.9 percent on Wednesday.

Energy stocks were also firmer as crude prices CLc1 traded above $67 a barrel. BP (BP.L: Quote, Profile, Research, Stock Buzz) and Royal Dutch Shell (RDSb.L: Quote, Profile, Research, Stock Buzz) rose 2.3 and 2 percent, respectively.

The Wall Street Journal said Federal Deposit Insurance Corp Chairman Sheila Bair is expected to suggest in a Senate Banking Committee on Thursday that the government give banks incentives to turn troubled loans into more affordable mortgages, according to a person familiar with her testimony. [ID:ID:nBNG389655]

Banks also gained, with Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz), Lloyds TSB (LLOY.L: Quote, Profile, Research, Stock Buzz), HBOS (HBOS.L: Quote, Profile, Research, Stock Buzz) and HSBC (HSBA.L: Quote, Profile, Research, Stock Buzz) rising between 0.1 and 2.7 percent.

Japan's Nikkei average .N225 pared its earlier losses to end down 2.5 percent after the Wall Street Journal report that the U.S. administration may consider the $40 billion proposal.

Overnight, U.S. stocks tumbled to five year lows as investors grappled with an increasingly dire outlook for the global economy following a raft of disappointing profits and outlooks from major U.S. companies. But U.S. index futures SPc1 DJc1 NDc1 were up 0.8 to 1.9 percent.

"The Dow Jones futures are very, very strong," a trader said. "But to be honest with you, it's all very tentative. It's quite possible we may end up going down."

HIGH STREET STRUGGLING?

Investors will look to UK retail sales data for September at 0830 GMT for more clues on the extent of the impending economic slowdown.

According to a report by Verdict Research, spending on non-food items on the British high street is set to fall in the run-up to Christmas for the first time in more than a decade. [ID:nLN49067]

But retailers were up, with Marks & Spencer (MKS.L: Quote, Profile, Research, Stock Buzz) and Kingfisher (KGF.L: Quote, Profile, Research, Stock Buzz) adding 0.5 to 0.7 percent.

DSG International (DSGI.L: Quote, Profile, Research, Stock Buzz) was up 7.5 percent. Europe's number two electrical goods retailer and a FTSE 250 .FTMC listed company posted a big fall in first-half underlying sales and said it was cutting investment due to a "significant deterioration" in consumer confidence. [ID:nLM51945]

Weaker metal prices weighed on miners, with BHP Billiton (BLT.L: Quote, Profile, Research, Stock Buzz), Rio Tinto (RIO.L: Quote, Profile, Research, Stock Buzz), Xstrata (XTA.L: Quote, Profile, Research, Stock Buzz), Lonmin (LMI.L: Quote, Profile, Research, Stock Buzz), Vedanta Resources (VED.L: Quote, Profile, Research, Stock Buzz) and Antofagasta (ANTO.L: Quote, Profile, Research, Stock Buzz) losing between 0.9 to 5.9 percent.

Rio Tinto said it had cut its outlook for Chinese economic growth in 2009 to 8-9 percent, but expects commodity prices to bounce back some time next year. [ID:nSYB004553]

British Airways (BAY.L: Quote, Profile, Research, Stock Buzz) slipped 2.2 percent after Cathay Pacific Airways (0293.HK: Quote, Profile, Research, Stock Buzz) denied market talk it was planning a takeover bid for the UK carrier. British Airways shares had leapt 4.3 percent on Wednesday on the market talk. (Additional reporting by Simon Falush; Editing by Hans Peters)