FTSE breaks losing streak; banks, commods surge

* Banks rally as risk appetite returns

* Mining, energy stocks gain as commodity prices rise

* Tullow Oil falls on Heritage sale

By David Brett

LONDON, Nov 23 - Britain's top share index ended sharply higher on Monday, snapping a four-day losing streak, with commodity and banking stocks rallying after comments by a senior U.S. Federal Reserve official.

The FTSE 100 index <.FTSE> finished up 104.09 points, or 2 percent, at 5,355.50 and recorded its biggest one-day percentage rise in more than six weeks. The index closed 0.3 percent lower on Friday after falling in the previous three sessions.

The UK blue chip index is up 20.8 percent this year and has soared more than 50 percent since touching a six year trough in March, but remains 1.1 percent off levels prior to Lehman Brothers' collapse.

"London shares have raced ahead today, as the dollar's recent strength tapered away after weekend comments by a Federal Reserve board member that monetary policy would remain loose into 2011," said Michael Hewson, analyst at CMC Markets.

"These comments prompted a renewed appetite for risk which has buoyed interest in mining and banking shares across the board," he added.

St. Louis Federal Reserve President James Bullard said on Sunday the Fed should keep alive its mortgage-related assets purchase program beyond a planned end date to help stimulate the economy. [ID:nN22246631]

Banking issues, which tend to be beneficiaries of increasing risk appetite, rose strongly. Barclays <BARC.L>, HSBC <HSBA.L>, Standard Chartered <STAN.L> and Royal Bank of Scotland <RBS.L> rose 2.7 to 5 percent.

Lloyds Banking Group <LLOY.L> added 3.8 percent after it said it had agreed to swap 8.78 billion pounds of bonds as part of a deal aimed at funding its exit from a costly state-backed insurance scheme for bad debts. [ID:nLK695084]

Miners posted chunky gains as metals prices rose across the board, bolstered by a weaker dollar, with gold <XAU=> touching new historic highs during the session.

Eurasian Natural Resources <ENRC.L>, Randgold Resources <RRS.L>, Fresnillo <FRES.L>, Lonmin <LMI.L>, Xstrata <XTA.L>, and Rio Tinto <RIO.L> gained 2.8 to 4.3 percent.

"With no end in sight for the dollar's slump, gold's success looks set to continue pushing the FTSE towards the psychological 5,500 barrier," said Philip Gillett, sales trader at IG Index.

U.S. HOME SALES FUEL SURGE

Sales of previously owned U.S. homes rose in October at a faster-than-expected pace to the highest in more than 2-1/2 years as buyers rushed to take advantage of a popular tax credit. [ID:nN23249040]

The data strengthened risk appetite, with energy stocks in demand as crude prices <CLc1> also benefited from the weaker dollar.

BP <BP.L>, Royal Dutch Shell <RDSa.L> and BG Group <BG.L> added 1.2 to 2.1 percent.

Tullow Oil <TLW.L> bucked the trend, shedding 0.3 percent as investors assessed the implications of the sale by Heritage Oil <HOIL.L> of its Ugandan operations, in which Tullow is a 50 percent partner.

Mid-cap explorer Heritage reversed earlier gains to shed 5.1 percent as the news of the Ugandan disposal to Italy's Eni <ENI.MI> for up to $1.5 billion was balanced by the ending of merger talks with Turkey's Genel. [ID:nGEE5AM07K]

Among the limited fallers, a mix of defensive issues were under pressure, with testing equipment firm Intertek <ITRK.L> losing 0.9 percent and packaging firm Bunzl <BNZL.L> shedding 1.2 percent. ((david.brett@reuters.com; +44 207 542 8099; Reuters Messaging:david.brett.reuters.com@reuters.net))