* FTSE up 0.3 percent by midday
* Lloyds surges on in-line results; banks higher * Oil majors, ex-divs weigh on index
By Harpreet Bhal
LONDON, August 5 (Reuters) - Britain's blue chip shares rose 0.3 percent by midday on Wednesday, supported by gains from banks after Lloyds Banking Group rose on in-line earnings, while reassuring economic data added to positive sentiment.
By 1100 GMT, the benchmark FTSE 100 was up 13.86 points at 4,685.23, reversing losses from earlier in the day not far off Monday's close gains when the index hit its best closing level since the collapse of Lehman Brothers late last year.
Lloyds powered the banking sector higher, jumping 13.9 percent after the bank posted a 4 billion pounds loss in the first half of the year as it was hit by a surge in bad debts from the HBOS business, but said it was through the worst..
"Banks are very much in focus and while the (Lloyds) numbers weren't great, they could have been very much worse," said Peter Dixon, economist at Commerzbank.
Barclays, HSBC, Standard Chartered, Royal Bank of Scotland were all higher, adding between 1.9 and 5.4 percent.
The index pared early losses after data showed Britain's services sector unexpectedly surged in July to grow at its fastest pace in more than a year.
Mining stocks shook off early losses, with Anglo American, Kazakhmys, Lonmin, Vedanta Resources and Xstrata up between 0.5 and 2.8 percent as metals prices gained ground.
Banc of America-Merrill Lynch wrote in a research note that the outlook for metals prices was rosy as the global economy begins to pick up, with commodity consuming nations such as the U.S. and China expected to show growth in 2010.
HOUSING REBOUND
Property firms drew support from data showing house prices in Britain jumped 1.1 percent in July, according to lender Halifax.
British Land, Hammerson, Land Securities Group and Liberty International advanced between 3.6 and 6.7 percent.
Other economic data also provided evidence that the economic downturn may be abating.
British industrial output rose unexpectedly in June and at its fastest pace since October 2007, according to the Office of National Statistics.
Meanwhile British consumer confidence edged up in July, driven in part by expectation of higher house prices and an end to the economic downturn, the Nationwide Building Society said.
"The data surprised on the upside which is good news for the UK economy as it indicates we're in for a slow grind of recovery rather than a rapid contraction," Dixon said.
Among individual gainers, British Airways rose 7.6 percent after American peers reported robust July traffic figures, and Hong Kong's Cathay Pacific posted first half profits, traders said.
Energy firms were in the doldrums, however as crude prices fell from earlier highs but remained above $71 a barrel.
BP, Cairn Energy and Tullow Oil fell between 0.3 and 1.4 percent, while BG Group and Royal Dutch Shell fell 2.2 and 2.3 percent respectively as the companies traded ex-dividend.
Ex-dividend factors knocked 10.67 points off the blue chip index on Wednesday, with AstraZeneca down 0.5 percent and Reed Elsevier 1.7 percent lower as the two companies also lost their dividend payout.
Later in the session the market will likely focus on a big batch of U.S. data including June factory orders, a revision to June durable goods orders, the July ISM non-manufacturing index, and July's ADP employment survey. (Additional reporting by Simon Falush; Editing by Hans Peters)