* Banks rally; HSBC buoyed by Goldman upgrade
* Miners recover after recent declines
* Inflation data awaited
By Jon Hopkins
LONDON, Aug 18 (Reuters) - Britain's leading shares index rose 0.8 percent in early trading on Tuesday, led by a recovery from banks, miners and oils ahead of July inflation data.
By 0757 GMT, the FTSE 100 index was 35.63 points higher at 4,680.64, having dropped 1.4 percent on Monday - its biggest one-day percentage loss since July 2.
"The market is recovering after Monday's drop thanks mainly to a switch back by miners, oils and banks, but there remains some nervousness on the economic picture, particularly ahead of today's UK inflation numbers," said Mic Mills, senior trader at spread betters ETX Capital.
The July consumer prices index will be released at 0830 GMT, with CPI inflation forecast to fall to 1.5 percent in July from 1.8 percent in June..
Banks were the biggest blue chip gainers early on, recouping some recent losses led by HSBC, up 2.7 percent after Goldman Sachs raised its rating for the global player to 'buy' from 'neutral' with an incerased target price of 820 pence.
Goldman said HSBC was highly geared to a global recovery due to the absence of any significant drag from U.S. consumer credit losses.
Standard Chartered gained 1.3 percent helped by a Goldman Sachs target price hike, while Barclays, Lloyds Banking Group, and Royal Bank of Scotland took on 0.3-2.9 percent.
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.
Miners also provided a good prop for the FTSE 100 index, bouncing back as well in-line with a rally by copper prices having taken a mauling after last week's weak U.S. consumer confidence data dented hopes for a swift economic recovery.
Xstrata was the top blue chip gainer, up 3.8 percent, while Eurasian Natural Resources, Rio Tinto, Kazakhmys, and Fresnillo added 2.2-2.9 percent.
Rio Tinto agreed to sell its Alcan packaging unit for abouut $2 billion to Australia's Amcor, easing its debt burden.
Oils got a boost for a firmer crude price, which rose back above $67 a barrel, with Royal Dutch Shell, BP, BG Group, Cairn Energy, and Tullow Oil gaining 0.4-1.8 percent.
Real estate issues were active following first-quarter results from British Land and with Banc of America Securities-Merrill Lynch issues a bullish note on the sector.
The broker upgraded its rating for both British Land and Liberty International and raised target for their blue chip peers Hammerson and Land Securities.
Liberty International, Hammerson, and Land Securities gained 0.3 to 1.8 percent, but British Land fell 0.1 percent after its results and having been buoyed by recent takeover speculation.
British Land posted a smaller-than-expected 9 percent fall in first-quarter net asset value (NAV) to 361 pence in its fiscal first quarter but failed to accompany the numbers with any hoped for corporate action.
Elsewhere among blue-chip fallers, drug issues retraced some of Monday's gains as defensive attractions were pushed into the background.
GlaxoSmithKline shed 0.8 percent unsettled by disappointing clinical trials news for a blood cancer drug being developed by its Danish partner Genmab.
AstraZeneca lost 0.3 percent, but Shire added 1.2 percent as vague bid speculation continued to swirl.
Oil services firm Petrofac was the biggest FTSE 100 faller, down 2.4 percent after Morgan Stanley cut its stance to 'equal-weight' from 'overweight', with mid cap peer Wellstream down 1.7 percent after a Citigroup downgrade.
Later on Tuesday, investors will have U.S. producer prices to focus on. These are forecast to have fallen 0.3 percent in July, after rising 1.8 percent in June. (Editing by Dan Lalor)