UK stocks rise as U.S data sparks recovery hopes

* 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 a three session losing streak on Thursday, led higher by gains in commodity and financial stocks as a fall in U.S. jobless claims fuelled recovery hopes.

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

add 0.3 percent. The FTSE 100

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

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

Gains by mining stocks

provided the biggest lift for the blue chips, up 1.7 percent, supported by a firmer copper price

as the U.S. data relieved worries over global growth prospects. Hopes that top metals consumer China could launch fresh stimulus measures offered additional help.


were also in demand, up 1.9 percent.

Royal Bank of Scotland

was a strong performer, ahead 4.2 percent as shares in its spun-off insurance business, Direct Line

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

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

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


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

"This is the first opportunity since the profit warning to look closely into the numbers and see if a turnaround by management can allow upgrades to EPS (earnings per share) ... we see 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 of the 90-day daily average, by far the most actively traded blue chip, with FTSE 100 volume at 91 percent of the daily average.

Conversely, WM Morrison

was the biggest blue chip faller, down 1.6 percent after two broker downgrades impacted Britain'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 Santo Investment 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 most blue chip fallers were also defensive stocks, seen as less exposed 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 were woefully thin, so we would have to see this move to the upside go further to be confident that all the sellers have been shaken out," said Angus Campbell, Head of Market Analysis at Capital Spreads.

(Editing by Catherine Evans)




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