* Miners up; industrial metals see demand
* Banks rally; Goldman upgrade lifts HSBC
* Oils firmer; crude rallies as U.S. dollar eases
* UK inflation steady at 1.8 percent
By Jon Hopkins
LONDON, Aug 18 (Reuters) - Britain's top share index rose 0.8 percent by mid-session on Tuesday, with banks, miners and oils leading the way, reversing some of the losses sustained in the previous session.
By 1100 GMT, the FTSE 100 index was 37.12 points higher at 4,682.13, having dropped 1.4 percent on Monday - its biggest one-day percentage loss since July 2.
Miners rebounded alongside rallying industrial metals as investors bet on renewed demand following Monday's retraction.
"It looks like this (recent) sell-off has so far been viewed as an opportunity to buy into stocks such as Xstrata and Rio Tinto," said Anthony Grech, market strategist at IG Index.
"It would appear that some people still have the view that there are even more gains to come from the (mining) sector."
Xstrata gained 5.5 percent, topping the risers chart, while Kazakhmys added 3.7 percent, with Eurasian Natural Resources, Rio Tinto and Fresnillo rising between 1 percent and 3.6 percent.
Rio Tinto found favour after the company agreed to sell its Alcan packaging unit for about $2 billion to Australia's Amcor, easing its debt burden.
On the economic front, British consumer price inflation held steady at up 1.8 percent year-on-year, surprising analysts who were expecting a fall back to 1.5 percent.
Banks pared some recent losses. HSBC climbed 2.5 percent buoyed by Goldman Sachs upping its rating for the global player to 'buy' from 'neutral' with an increased target price of 820 pence.
Goldman Sachs also provided a spur for Standard Chartered, which was 1.7 percent higher, as the broker raised its target price.
Lloyds Banking Group and Royal Bank of Scotland put on 0.9 and 1.9 percent, respectively.
Royal Bank of Scotland is believed to be looking at following Barclays and Lloyds Banking Group and selling part of its asset management arm, the Daily Express reported.
Life insurers resumed their recent good run, fuelled by recent results in the sector and speculative interest.
Friends Provident, which is the subject of a bid from Resolution and Prudential, which recently raised its dividend, were up 1.2 and 1 percent, respectively.
Legal and General gained 2.9 percent and Aviva added 1.2 percent.
Oils firmed as crude price headed towards $68 dollar a barrel, with Royal Dutch Shell, BP, BG Group, Cairn Energy, and Tullow Oil up 0.4-2.2 percent.
REAL ESTATES WEIGH
Real estate issues were lower as British Land fell 2.4 percent after the company rebuffed takeover rumours following its first-quarter results.
Other property shares were dragged lower, with Liberty International and Land Securities down 1.1 and 2.4 percent, respectively.
Investors banked profits in supermarkets, which rose during Monday's session on defensive considerations. Wm. Morrison Supermarkets and Tesco lost 0.5 percent and 0.1 percent, respectively.
Oil services firm Petrofac fell 1.8 percent after Morgan Stanley cut its stance to 'equal-weight' from 'overweight', with mid-cap peer Wellstream down 0.5 percent after a Citigroup downgrade.
Later on Tuesday, investors will focus on the United States, with housing starts and producer prices data due out at 1230 GMT.
(Editing by Simon Jessop)