* FTSE down 0.1 percent
* Banks recover on Ireland rescue talk
* Commodities hit by China rate hike fears
By Nia Williams
LONDON, Nov 12 (Reuters) - Britain's top share index pared
losses on Friday after market talk of an EU rescue package to
resolve Ireland's debt woes sparked a recovery in the banks.
An Irish Finance Ministry spokesman said the rumours of a
bailout were untrue but by 1157 GMT, the FTSE 100 <> was
down 7.28 points, or 0.1 percent at 5,807.95, recovering from a
session low of 5,711.73.
"These rumours could all be complete puff and nonense but
the market likes it," Yusuf Heusen, senior sales trader at IG
Index said.
Royal Bank of Scotland <RBS.L> was one of the top performers
on Britain's blue chip index, adding 2.7 percent and reversing
losses from Thursday when investors fretted over the knock-on
effect of any possible Irish default.
RBS has the second biggest exposure, 5.020 billion euros, to
Irish sovereign debt, based on data supplied to regulators under
a stress test conducted in July. []
Lloyds <LLOY.L> and Standard Chartered <STAN.L> also climbed
0.7 and 1 percent respectively as the banking sector
<.FTNMX8350>, which had languished near the bottom of the index
in early trade pared losses.
Rolls-Royce <RR.L> was the top FTSE 100 gainer, up 4.1
percent in an extension of the previous session's gains, buoyed
by an update from the firm saying the A380 engine failure was
confined to one component in the company's Trent 900's turbine.
Investec said the "clarity is a positive".
Shares in the enginemaker had fallen more than 10 percent
since Nov. 3 when Qantas Airways <QAN.AX> suspended flights of
its Airbus <EAD.PA> A380 planes after the failure of a Trent 900
caused one of its aircraft to make an emergency landing.
Rolls-Royce said it now expected underlying profit growth
for the full year to be slightly lower than previously expected
because of costs associated with the blowout. []
COMMODITIES HIT BY CHINA WORRIES
Commodity-related stocks were the top fallers in the index
as the market digested Chinese data showing inflation hit a
25-month high in October and bank lending blew out, fuelling
concerns the economy is overheating. []
Investors now face the prospect of Chinese authorities
taking steps to accelerate fiscal tightening and reduce stock
market speculation by raising interest rates, increasing bank
reserve requirements and allowing the currency to appreciate.
Mining <.FTNMX1770> and energy <.FTNMX0530> stocks retreated
with UK-based Kazakhmys <KAZ.L> the top FTSE faller, down 2.6
percent.
Global miner Anglo American <AAL.L>and platinum producer
Lonmin <LMI.L> both dropped around 2.2 percent on the prospect
that the world's largest commodities consumer might reduce
requirements.
The FTSE 100 hit a 29-month high earlier this week in the
aftermath of a second round of quantitative easing from the U.S.
Although the index has retreated in the last few days, technical
analysts said overall the trend remained bullish.
"Key support area to watch is set around 5,700/5,750. As
long as this area is not penetrated, a technical rebound remains
the most probable scenario in the forthcoming days with 5,896 as
target," Nicolas Suiffet, technical analyst at Trading Central
said.
(Editing by Jane Merriman)
