* FTSE turns positive, up 0.7 percent by mid-session
* Citigroup results help banks rally further
* Miners, oil stocks cap gains
By Rebekah Curtis
LONDON, July 18 (Reuters) - British blue-chip stocks were
hight at midday on Friday, reversing early losses as better than
expected results from U.S. bank Citigroup added steam to a rally
in banks and offset weakness in commodity stocks.
By 1115 GMT the FTSE 100 <> was up 36.5 points, or 0.7
percent, at 5,322.8 points. The index closed up 2.6 percent on
Thursday, when a surge in battered banks was fuelled largely by
better than expected results from JP Morgan <JPM.N>.
U.S. stock futures also reversed an earlier slide and rose
after the results from Citigroup. The largest U.S. bank posted a
smaller than expected $2.5 billion second-quarter loss,
suffering writedowns and credit losses tied to deteriorating
credit markets and the slumping economy.
The net loss was 54 cents per share and compared with a
year-earlier profit of $1.24 per share, or $6.23 billion.
"The net share loss ... is coming in better than consensus,"
said Martin Slaney, head of derivatives, at GFT Global Makets.
"Things aren't as bad as (they had) been priced in. It's
going to help UK banks ... But we've still got plenty of the
second quarter earnings season to go, so possibly next week it
will be a different story."
Among banks, which also staged a stellar rally on Thursday,
Royal Bank of Scotland <RBS.L> was up 6.9 percent, Lloyds TSB
<LLOY.L> rose 5.3 percent and HBOS <HBOS.L> added 2.8.
"These securities have been very badly beaten up," said
Edward Menashy, an economist at Charles Stanley. "(But) We know
one thing -- no central bank will allow a major bank to fall."
The British macroeconomic backdrop is proving a challenge
for the banking sector as growth slows and inflation remains
stubbornly high.
The latest batch of data on Friday showed public borrowing
hit record levels in the first quarter of the financial year,
threatening to breach the restrictions the government set itself
on how much debt it can take on.
BOUNCING BACK
Merrill Lynch's <MER.N> larger than expected $4.89 billion
quarterly loss on Thursday, along with Google <GOOG.O> and
Microsoft <MSFT.O> missing Wall Street's estimates, initially
weighed on global equities.
Meanwhile, mortgage giant Freddie Mac <FRE.N> is considering
raising capital by selling as much as $10 billion in new shares
to investors, The Wall Street Journal reported, citing people
familiar with the matter.
Miners capped gains, however. Xstrata <XTA.L> shed 3.7
percent, while BHP Billiton <BLT.L> lost 2.8 percent and Rio
Tinto <RIO.L> 3.2 percent.
Oil majors BP <BP.L> and Royal Dutch Shell <RDSa.L> also
weighed on the index, both falling more than 1 percent as crude
prices rose above $131 a barrel but traded well down from recent
highs.
Shares in household and personal care product companies such
as Reckitt Benckiser <RB.L>, Henkel <HNKG_p.DE> and Beiersdorf
<BEIG.DE> fell after French beauty group L'Oreal <OREP.PA> cut
its full-year growth outlook late on Thursday, traders said.
Reckitt Benckiser fell 5.8 percent to top the losers' list
on the FTSE 100.
On the upside, GlaxoSmithKline <GSK.L> added 2.3 percent
after researchers said Britain's decision to choose its Cervarix
cervical cancer vaccine over Merck and Co's <MRK.N> Gardasil
could save the government 20 million pounds ($40 million)
annually. []
Meanwhile, the Daily Telegraph said the International
Monetary Fund had signalled that Britain was likely to avoid
recession, upgrading its economic forecast for both this year
and next.
(Additional reporting by Dominic Lau; editing by Rory Channing)
