FTSE rises 0.4 percent early as oils and banks gain

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By 8.51 a.m., the FTSE 100 .FTSE was up 21.3 points, or 0.4 percent at 5,391.5 after ticking down 1.6 points on Thursday. The UK benchmark is down more than 16 percent for the year.

Banks rebounded after recent losses as Barclays, Royal Bank of Scotland, Lloyds TSB, HBOS, HSBC and Standard Chartered gained between 0.2 and 2.3 percent.

The sector was also helped by the announcement from Benfield and Aon Corp, one of the world's largest insurance brokers, that the U.S. firm had made a recommended cash offer for the UK-listed broker.

Mid-cap Benfield leapt nearly 30 percent.

Bradford & Bingley advanced nearly 2 percent after the mid-cap mortgage lender said underwriters and other banks had entered a lock-up agreement under which they have agreed not to dispose of the 426.7 million new shares for 20 days.

Investors are likely to keep an eye on the second reading of the UK GDP figures, due at 9.30 a.m., for further clues on the state of the economy, and on what the U.S. Federal Reserve's Ben Bernanke has to say about the credit market and the financial sector in a speech at 3 p.m.

"At one point there were some hopes that there could be an easing on inflationary pressure as oil prices were going down. That's now slightly reversed," said Richard Hunter, head of UK equities at Hargreaves Lansdown. "Inflationary pressures remain and the underlying concern is still much the same."

"There is a little bit of a jump in the index. It's slightly exasperated by the fact that there is very thin trading volume at the moment ... It will be probably September when we see some volumes coming back."

Energy stocks were in demand as crude prices traded above $121 a barrel. BP, Royal Dutch Shell, BG Group, Tullow Oil and Cairn Energy added 0.3 to 2.3 percent.

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