FTSE gains as metals spur miners

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Schroders rose 4.3 percent after reporting that pre-tax profit for 2007 rose 35 percent to 392.5 million pounds, up from 290.0 million pounds in 2006.

By 8:47 a.m. the UK benchmark index was 47.8 points higher at 5,866.4. The index closed down 1.1 percent in the previous session as weak U.S. data and recent credit-related writedowns prompted investors to fret over a possible U.S. recession.

"It's a better start than we've had for some time," said Peter Dixon, an economist at Commerzbank, but he added that the rally was unlikely to continue.

"The Bank of England is unlikely to surprise us this week with any rate cuts, therefore I don't think markets in the UK are going to get any support from that angle, so its going to be a U.S.-driven week," he added.

The Bank of England is widely expected to leave interest rates unchanged at 5.25 percent on Thursday as it juggles the risk of a slowing economy against rising inflation pressures.

"There's just too much negative news coming out of the U.S. which is ultimately going to affect European markets... We're going to have another six weeks or so of reasonably sideways trading."

Financial stocks bounced after falling in the previous session. Royal Bank of Scotland rose 2.8 percent and Barclays added 2.4 percent. But HSBC fell 0.8 percent after jumping on results.

Across the Atlantic, U.S. stocks were mostly unchanged on Monday as soaring commodity prices lifted Alcoa and Exxon Mobil , while fresh fears over another mortgage lender and another spate of weak economic data dragged on financials.

Japan's Nikkei also ended flat overnight.

Economic data which may offer the markets direction include euro zone PPI and fourth-quarter GDP numbers at 10:00 a.m..

METALS BOOST MINERS

All miners rose and together added nearly 12 points to the FTSE 100 as platinum hit a record high while gold traded within sight of its all-time peak. Lonmin added more than 2 percent, Vedanta rose 1.6 percent and BHP Billiton gained 1.7 percent.

Rio Tinto added 1.3 percent after its Chief Executive Tom Albanese said growing Chinese demand for metals should more than offset any problems caused by a slowing of the U.S. economy.

Also, BHP Billiton is talking to sub-underwriting banks on a record $55 billion loan backing its hostile bid for Rio Tinto, banking sources said.

Motor insurer Admiral dropped about 7 percent after it said UK trading conditions were improving very slowly and warned of a tougher year ahead for its price comparison site, but reported a 24 percent jump in 2007 profit, beating forecasts.

Power firm Drax, which runs Britain's biggest coal-fired station, fell 3.6 percent after it reported a 16 percent fall in year profit.

Drax, whose single massive plant in northern England is the country's biggest source of carbon dioxide, reported underlying pre-tax profit of 439 million pounds for 2007, compared with analysts' average forecast of 454 million and down from 524 million in 2006.

(editing by Elizabeth Fullerton)