FTSE rises at midday, miners offset bank losses

* FTSE 100 rises 0.6 pct

* Miners and oils track firmer raw material prices

* Banks fall, bleak outlook for sector

By Harpreet Bhal

LONDON, Nov 3 (Reuters) - Britain's leading share index had edged up by midday on Monday, sustained by gains in commodity stocks, while concern about Barclays' (BARC.L: Quote, Profile, Research, Stock Buzz) fundraising dented banking stocks.

Miners were among the top performers on the FTSE 100 .FTSE as improved risk appetite boosted metal prices, while energy shares rallied as the price of crude oil CLc1 rose modestly.

By 1205 GMT, the benchmark index rose 25.79 points to 4,402.66, on track for a fifth day of gains, its longest since December 2007.

The index gained 12.7 percent last week, its strongest week on record, fed by anticipation of a widely-expected interest rate cut from the Bank of England later this week, although it was down 10.7 percent in October.

Mike Lenhoff, chief strategist at Brewin Dolphin said the market has reacted positively to a spate of interest rate cuts in the United States, China, India and Japan, turning the spotlight to the BoE on Thursday.

"The underlying tone of the market has improved. There is an encouraging feel to what is going on," he said.

However, he said the outlook for the banking sector remained unfavourable as potential recession in Britain has prompted fears of further write-downs and bad debts.

Banks tempered gains on the broader market, as Barclays dropped 4.9 percent on concern that its $12 billion capital fundraising is too expensive. Analysts at Merril Lynch estimated the fundraising may cost investors 3.2 billion pounds.

Lloyds TSB (LLOY.L: Quote, Profile, Research, Stock Buzz), the British bank in the process of buying rival HBOS (HBOS.L: Quote, Profile, Research, Stock Buzz), lost 0.7 percent after it said its profits for the first nine months of the year fell sharply as a result of financial market turmoil and rising bad debts.

HBOS climbed 4.3 percent after the Sunday Times newspaper said Lloyds TSB could face competition for its bid from HBOS's Internet banking unit.

HBSC (HSBA.L: Quote, Profile, Research, Stock Buzz) and Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz) fell 2.9 and 1.4 percent respectively, while Standard Chartered advanced 3.2 percent.

Among other decliners were index-heavyweights Vodafone (VOD.L: Quote, Profile, Research, Stock Buzz) and supermarket group Tesco (TSCO.L: Quote, Profile, Research, Stock Buzz). Tesco fell 3.7 percent, while Vodafone shed 4.3 percent.

Helping keep the FTSE 100 in positive territory were the commodity stocks as a weaker dollar supported base and precious metal prices, while crude oil futures turned positive.

Kazakhmys (KAZ.L: Quote, Profile, Research, Stock Buzz) surged 13.3 percent, lifted by rising copper prices. Xstrata (XTA.L: Quote, Profile, Research, Stock Buzz), Vedanta Resources (VED.L: Quote, Profile, Research, Stock Buzz), Lonmin (LMI.L: Quote, Profile, Research, Stock Buzz) and Eurasian (ENRC.L: Quote, Profile, Research, Stock Buzz) added between 6.5 and 7.9 percent. Rio Tinto (RIO.L: Quote, Profile, Research, Stock Buzz) added 1.9 percent, after the company said its new ilmenite project is on track to produce and the company sees most of its projects in a strong position to weather any economic scenario.

Energy firms also recorded gains, with BP (BP.L: Quote, Profile, Research, Stock Buzz) and Royal Dutch Shell (RDSa.L: Quote, Profile, Research, Stock Buzz) up between 0.8 and 1.6 percent, while Cairn Energy (CNE.L: Quote, Profile, Research, Stock Buzz) gained 7 percent. (Editing by Hans Peters)