FTSE up 1 pct as bank gains help sustain recovery

* FTSE 100 gains 1 percent

* Miners slide following collapse of BHP Billiton, Rio deal

* Financials continue recovery

By Simon Falush

LONDON, Nov 25 (Reuters) - Britain's top share index rose 1 percent by midday on Tuesday with gains in embattled financials outweighing a slide in resources as the world's top miner, BHP Billiton (BLT.L: Quote, Profile, Research, Stock Buzz), dropped its hostile bid for Rio Tinto (RIO.L: Quote, Profile, Research, Stock Buzz).

The benchmark's rise added to the record gains posted the previous session, as investor anxiety about the financial sector eased slightly. By 1128 GMT, the FTSE 100 .FTSE had gained 29.25 points to 4,192.21 after a record 9.8 percent gain the previous session.

Banks, which have fallen some 56 percent this year .FTNMX8350, hammered by their exposure to the ailing credit market, recovered some of their losses as investors looked to pick up cheap assets.

"Lot's of stocks were oversold and as happened after previous sell-offs, there's been a bit of a bounce," said Colin McLean, managing director at SVM Asset Management in Edinburgh.

He said measures to boost the UK economy announced on Monday in the pre-budget report -- including cutting value-added tax to 15 percent, from 17.5 percent -- would benefit banks like HBOS (HBOS.L: Quote, Profile, Research, Stock Buzz) and Lloyds TSB (LLOY.L: Quote, Profile, Research, Stock Buzz) as they are heavily exposed to the UK consumer.

Lloyds TSB added 9.1 percent and HBOS gained 6.6 percent, while Barclays (BARC.L: Quote, Profile, Research, Stock Buzz) firmed 6.9 percent.

Other financial stocks also rose, with Man Group (EMG.L: Quote, Profile, Research, Stock Buzz) gaining 4.6 percent and Schroders (SDR.L: Quote, Profile, Research, Stock Buzz) adding 10.2 percent.

MINERS SLIDE

Mining stocks were the biggest fallers as the collapse of the BHP Billiton Rio deal highlighted the problems of deteriorating demand which have hammered the sector in recent months.

While BHP Billiton gained 16.2 percent on relief it is not bidding, Rio Tinto shares fell 35.4 percent, leading other miners lower.

Eurasian Natural Resources (ENRC.L: Quote, Profile, Research, Stock Buzz), Xstrata (XTA.L: Quote, Profile, Research, Stock Buzz), and Lonmin (LMI.L: Quote, Profile, Research, Stock Buzz) lost between 2.6 percent and 4.8 percent.

The World Bank said China's growth could well slow to its weakest pace in almost two decades next year, the latest grim prognosis for a global economy buckling despite the concerted efforts of policymakers. [ID:nSP381382]

What started more than a year ago as a meltdown in the U.S. market for high-risk mortgages has engulfed the world, freezing access to credit, sparking bank collapses and requiring the financial bailout of entire countries.

"The fundamentals have not changed, corporate earnings still look fairly weak, so yesterday's increase should be seen as a bear market rally," said Richard Hunter, head of equities at Hargreaves Lansdown.

Shares in BT Group (BT.L: Quote, Profile, Research, Stock Buzz) slid 2.1 percent after Merrill Lynch cut its rating to "neutral" from "buy" and reduced its price target, saying the telecoms company is increasingly exposed to the sharp slowdown in UK consumer and corporate spending.

Shares in Wolseley (WOS.L: Quote, Profile, Research, Stock Buzz), the British plumbing and heating supplies company, fell 5.1 percent as RBS cut its rating to "sell" from "hold", and reduced its target price to 224 pence from 300 pence. (Editing by Andrew Macdonald)