* Banks, miners, oils up as U.S. indexes surge
* Defensives higher on deals and M&A speculation
* Wolseley soars after above-forecast results
By David Brett
LONDON, Sept 28 (Reuters) - Britain's leading share index closed 1.6 percent higher on Monday, with heavyweight banks, miners and energy stocks reversing early losses, helped by a strong opening for the U.S. market.
The FTSE 100 rose 83.5 points, or 1.6 percent, to close at 5,165.70, after rising 0.1 percent on Friday.
"It wasn't until the U.S. open that the markets turned themselves," said Jimmy Yates, Head of Equities at CMC Markets.
"While we still have weakness in the U.S. dollar and no sign of exit strategy from the global stimulus plans then we could still see strength in global equities," he added.
Banks led the gainers as investors turned once more to riskier assets, spurred on by the opening rally in New York.
Standard Chartered rose 1.7 percent, as Royal Bank of Scotland (RBS) hiked its target price to 2,000 pence from 1,600. However, RBS itself dropped 0.8 percent, as ING cut its recommendation on the stock to "sell" from "hold".
Lloyds Banking Group, HSBC and Barclays rose 0.3-2.7 percent.
Energy stocks surged as oil pushed back above $67 a barrel on the back of a weakening dollar, and as tensions between Iran and the West increased.
BP, BG Group and Royal Dutch Shell added 0.5-2 percent. Meanwhile, Cairn Energy and Tullow Oil shed 0.3 and 1.5 percent, respectively.
Miners shrugged off concerns over the falling price of copper, which hit its lowest level since mid-August on worries over rising inventories, further falls in Chinese imports and still tepid indications of a pick-up in demand outside China, as M&A activity lifted the sector.
BHP Billiton rose 2.7 percent as AIM-listed coal miner Churchill Mining said it had received three separate approaches but denied press speculation linking the company to BHP Billiton.
Fresnillo, Antofagasta, Xstrata, Lonmin, Rio Tinto and Randgold Resources gained 2.1 to 3.9 percent.
DEFENSIVES IN DEMAND
Laggards of the recent recovery, defensive tobacco and pharmaceutical companies were also higher.
Imperial Tobacco closed 0.3 percent higher as Investec raised its target price for the firm to 1,910 pence from 1,630 pence. Peer British American Tobacco put on 1.2 percent.
Drugmaker GlaxoSmithKline added 2 percent after it said it was hoping to announce further new markets for its Lucozade drink this year.
The company has also completed an innovative 1.5 billion euro contract with Brazil, guaranteeing sales of its pneumococcal vaccine Synflorix over the entire life of the product, the Financial Times said.
AstraZeneca rose 2.8 percent as traders cited talk that Swiss Rival Novartis could be considering a takeover offer, though a London-based trader called the story "unlikely".
Plumbing supplies firm Wolseley made it to the top of the FTSE 100 gainers list, adding 11.2 percent following above-forecast full-year results that prompted Deutsche Bank to upgrade its rating on the stock to "buy" from "hold".
On the downside, Home Retail fell 3.2 percent after Credit Suisse cut its stance on the household goods retailer to "underperform" from "neutral", citing a negative assessment of the firm's Argos business.
With little in the way of economic data on Monday, things look set to get more interesting later this week.
"We have got UK GDP figures tomorrow and (U.S.) non-farm payrolls on Friday, so things will hot up," said Tim Hughes, head of sales trading at IG Index. (Editing by Will Waterman)