(corrects GMT time in second graph)
* Miners in demand; Fresnillo gains on upgrade
* Banks firmer; BoE interest rate decision awaited
* Oils up; crude off seven-week low
* Defensives weak as risk appetite returns
By David Brett
LONDON, July 9 (Reuters) - Britain's leading share index gained 0.8 percent in midday trade on Thursday with miners, banks and oils rebounding from the previous session's losses.
By 1014 GMT, the FTSE 100 index was 32.88 points higher at 4,173.11 after closing down 46.77 points, or 1.1 percent on Wednesday at its lowest close in more than two months.
"We're being driven by what's happening to the oil and mining stocks and it all seems to be inversely correlated to what's happening with the dollar," said GFT Global market strategist David Morrison.
The dollar dipped on Thursday as some risk appetite returned to the forex markets after an International Monetary Fund report late Wednesday said the global economy is slowly starting to pull out of a deep recession.
Miners were the FTSE's top performers following Wednesday's sell off, encouraged by earnings news from Alcoa.
After the U.S. market close, aluminium giant Alcoa reported a smaller-than-expected loss that gave a positive tone to the start of the second-quarter earnings season.
"The corporate earnings season in the U.S. is going to be important and the next two to three weeks could be a see-saw time," said Morrison.
Anglo American, Vedanta Resources, Kazakhmys, Antofagasta, Rio Tinto, BHP Billiton and Xstrata gained between 3.3 and 5.3 percent.
All of Anglo American's leading institutional shareholders turned down Xstrata's proposed 140 billion pounds nil-premium merger of equals, The Times reported.
Silver miner Fresnillo was the top FTSE 100 gainer, up 9.6 percent as Citigroup upgraded its rating to "buy" from "hold".
The Bank of England is expected to expand its 125 billion pound quantitative easing programme and keep interest rates at their record low of 0.5 percent when it announces the outcome of its latest monetary policy committee meeting at 1100 GMT.
Banking issues found good support, rallying once more following recent falls, with Royal Bank of Scotland, Lloyds Banking Group, Barclays, Standard Chartered and HSBC up 0.3 to 3.5 percent.
OILS RALLY
Oil producers gained as the price of crude bounced back from a seven week low. BG Group, BP.L and Royal Dutch Shell added between 0.2 and 1 percent.
Oil rose by more than $1 on Thursday to edge back above $61 a barrel, halting a six-session losing streak which has seen prices decline by 15 percent on concerns about the timing of any economic recovery.
Retailers moved higher boosted by positive comment from Citigroup, with Marks & Spencer standing out, up 2.8 percent after the broker raised its rating to "buy" from "hold".
Peers Next and Kingfisher gained 3 and 2.1 percent, respectively.
A broker upgrade also gave a lift to motor insurer Admiral Group, up 3.6 percent, with Banc of America-Merrill Lynch hiking its stance to "buy" from "neutral".
Defensive issues were the main fallers as an element of risk appetite returned to the market, with drugs, drinks and tobaccos the worst performing sectors.
Among them, Shire, AstraZeneca, and GlaxoSmithkline lost 0.6 to 1.2 percent, while Diageo shed 0.9 percent and Imperial Tobacco fell 0.2 percent. (Editing by Elaine Hardcastle)