* FTSE up 1.5 percent
* Beaten-down banks rise
* Rio Tinto gains, helped by positive RBS note
By Brian Gorman
LONDON, Aug 12 (Reuters) - Britain's top share index rose on Friday, nearly wiping out prior losses during a rollercoaster week, with the market likely to continue being driven by debt crises and weak growth rates on both sides of the Atlantic, as well as rumours.
Stocks hardest hit in recent weeks added most points to the key FTSE index.
Banking heavyweight Barclays rose 5.2 percent; RBS and Lloyds rose 4 percent and 3.1 percent respectively. The banks had lost more than 30 percent of their value in the past month as they were caught up in the euro zone sovereign debt crisis.
The banking sector was hit by rumours about the financial stability of French lender Societe Generale , which denied the rumours and whose shares, having fallen steeply on Wednesday, rallied for a second day on Friday.
Strategists and traders said rumours and speculation on such issues was bound to have an effect on the market.
"There is huge volatility and a lot of it is caused by the issue of bank funding. Banks normally do not go under as a result of asset writedowns, but they can go under if they cannot get funding," Macquarie equity strategist Daniel McCormack said.
Bans imposed by European regulators on short-selling in financial stocks in Belgium, France, Italy, and Spain took effect on Friday in a coordinated attempt to ease the market's panic attacks.
Traders said if Britain were to follow, it would have a limited effect. "You can understand why they do it, but it just builds up the problem for the point where it has got to be lifted," Ed Walsh, head of sales at Altium Securities.
Traders also pointed to a lack of other fundamental factors to drive markets.
Miners were also higher, with the FTSE 350 Mining index up 1.8 percent.
Rio Tinto rose 2.7 percent, helped by a positive note from RBS which reiterated a "buy" stance and said Rio was its top pick in the sector. RBS said Rio was best positioned to benefit from stronger iron ore prices, which have gained from supply issues.
Like many in the sector, Rio shares have lost more than 20 percent in the past month on worries that low global growth may reduce demand for metals.
Energy groups also supported the index's rise, with the FTSE 350 Oil & Gas Index up 1.2 percent, on higher crude prices.
London's blue chip index was up 78.38 points, or 1.5 percent, at 5,241.12 at 1123 GMT, having been as low as 5,099.31 earlier and after a 3.1 percent surge on Thursday.
The index was on course to fall 0.1 percent over the week, having hit its lowest close since July 2010 on Wednesday. Better-than-expected U.S. labour data helped fuel a rally late in the week.
ATTRACTIVE VALUATIONS
McCormack said while recent global data had been weak, share prices were now more than discounting this. "There is an argument the equity market is pricing in a recession," he said.
A recent pullback has made shares look cheap. Equity valuations on Thomson Reuters Datastream showed the FTSE 100 carrying a one-year forward price-to-earnings of 9.4, against a 10-year average of 14.
British construction output grew faster than first thought in the second quarter, data showed on Friday, raising the prospect of an upward revision to reported second-quarter GDP growth of 0.2 percent later this month.
After Thursday's gain, "the UK index appears to be building a base at around 5000," Bill McNamara, technical analyst at Charles Stanley, said.
"But, like the Dow, its latest price action is not compelling enough to declare that a decisive reversal is under way ... However, a close above 5,250 would bolster the short-term bull case and would give the impression that a retracement of the recent drop was underway, with an initial upside target of around 5,380." (Editing by Dan Lalor)
* For related prices, Reuters Terminal users may click on - * UK stock report FTSE index: <0#.FTS6> techMARK 100 index: FTSE futures: <0#FFI:> Gilt futures: <0#FLG:> Smallcap index: FTSE 250 index: FTSE 350 index: Market digest: Top 10 by vol: Top price gainers: Top % gainers: Top price losers: Top % losers: * For related news, click on - * UK hot stocks: [HOT&GB] Wall Street: Gilts report: Euro bond report Pan European stock report: Tokyo stocks: HK stocks: Sterling report: Dollar report: * For company prices, click on - * Company directory: By sector: * For pan-European market data and news, click on - * Daily European stocks report........................ European Equities speed guide................ FTSE Eurotop 300 index........................... DJ STOXX index................................... Top 10 STOXX sectors........................ Top 10 EUROSTOXX sectors................... Top 10 Eurotop 300 sectors.................. Top 25 European pct gainers.................... Top 25 European pct losers.....................