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UK stocks rise as U.S data sparks recovery hopes

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* FTSE jumps 0.9 pct, snaps three-session losing streak

* Commodity, financial stocks lead rally from 1-week low

* Surprise fall in U.S. jobless boosts risk appetite

* Burberry gains after H1 trading update reassures

By Jon Hopkins

LONDON, Oct 11 (Reuters) - Britain's top shares snapped athree session losing streak on Thursday, led higher by gains incommodity and financial stocks as a fall in U.S. jobless claimsfuelled recovery hopes.

The weekly claims figure was the lowest for four years andcomplemented last week's fall in U.S. unemployment, providinganother piece of evidence that the economy may be in bettershape and helping U.S. blue chips

add 0.3 percent.The FTSE 100

index closed up 53.04 points, or 0.9percent at 5,829.75, recovering after reaching its lowest levelsince October 1 early on Thursday.

"FTSE back at the important 5,800 level after bouncing offsupport. If we can hold this level then we might just be aboutto hear people discussing a year-end rally," said Lex van Dam, apartner at hedge fund Hampstead Capital, which manages around$500 million (314.8 million pounds) of assets.

Gains by mining stocks

provided the biggestlift for the blue chips, up 1.7 percent, supported by a firmercopper price

as the U.S. data relieved worries overglobal growth prospects. Hopes that top metals consumer Chinacould launch fresh stimulus measures offered additional help.

Banks

were also in demand, up 1.9 percent.

Royal Bank of Scotland

was a strong performer, ahead4.2 percent as shares in its spun-off insurance business, DirectLine

closed at 188 pence on their stock market debut, apremium of around 7 percent to their offer price.

Strong demand from private investors helped RBS raise 787million pounds via the sale of 30 percent of Direct Line at 175pence each, near the middle of their indicated pricerange.

Stuart Welch, CEO Of stockbroker TD Direct Investing said:"TD clients have made Direct Line Group their second mostpopular buy and top sell ... indicating that some clients haveopted to take a quick return on their investment."

LUXURY GAPBurberry

was the top gainer, up 13.3 percent as theluxury fashion group posted signs of slightly better trading inSeptember after a profit warning last month.

"This is the first opportunity since the profit warning tolook closely into the numbers and see if a turnaround bymanagement can allow upgrades to EPS (earnings per share) ... wesee any weakness as a buying opportunity," said Atif Latif,director sales and trading at Guardian Stockbrokers.

Trading volume in Burberry was very strong at 541 percent ofthe 90-day daily average, by far the most actively traded bluechip, with FTSE 100 volume at 91 percent of the daily average.

Conversely, WM Morrison

was the biggest blue chipfaller, down 1.6 percent after two broker downgrades impactedBritain's fourth-biggest food retailer, according to traders.

Volume in Morrison was 200 percent of the daily average.

Credit Suisse reduced its rating for Morrison to "neutral"from "outperform" on valuation grounds, while Espirito SantoInvestment Bank cut its stance on the stock to "sell" from"neutral" and trimmed its 2013 profit forecast.

Investors' increased willingness to take on risk meant mostblue chip fallers were also defensive stocks, seen as lessexposed to the vagaries of the economic cycle, with drugmakers,brewers, and utilities coming off worst.

"The rally does come with a word of warning as volumes werewoefully thin, so we would have to see this move to the upsidego further to be confident that all the sellers have been shakenout," said Angus Campbell, Head of Market Analysis at CapitalSpreads.

(Editing by Catherine Evans)

((jon.hopkins@thomsonreuters.com)(02075428954)(Reuters

Messaging: jon.hopkins.thomsonreuters.com@reuters.net))

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