Commodities, China hopes lift FTSE in early trade

* FTSE 100 rises 0.5 pct

* Commodities lead the upside

* Asian strength boosts global economic hopes

By Michael Taylor

LONDON, Aug 20 (Reuters) - The FTSE 100 .FTSE rose by 0.5 percent early on Wednesday, after heavy losses in the previous session, as commodities tracked higher crude and metal prices, and investors banked on sustained Chinese economic growth.

At 0737 GMT, Britain's benchmark index was up 23.8 points, or 0.5 percent, at 5,344.2 after falling 2.4 percent on Tuesday.

Asian markets .MIAS00000PUS recovered from a two-year low as Chinese shares surged on hopes Beijing would introduce a stimulus package to jump-start growth.

Positive Asian sentiment and rising precious metal prices helped buoy miners, while oils were boosted by U.S. crude CLc1 climbing to almost $115 a barrel.

BP (BP.L: Quote, Profile, Research, Stock Buzz), Tullow Oil (TLW.L: Quote, Profile, Research, Stock Buzz), BG Group (BG.L: Quote, Profile, Research, Stock Buzz) and Royal Dutch Shell (RDSa.L: Quote, Profile, Research, Stock Buzz) climbed 1.4-6.3 percent. UBS raised Tullow Oil's valuation rating to "buy" from "neutral".

Miners Rio Tinto (RIO.L: Quote, Profile, Research, Stock Buzz), BHP Billiton (BLT.L: Quote, Profile, Research, Stock Buzz), Xstrata (XTA.L: Quote, Profile, Research, Stock Buzz), Kazakhmys (KAZ.L: Quote, Profile, Research, Stock Buzz) and Anglo American (AAL.L: Quote, Profile, Research, Stock Buzz) rose 1.1-4 percent.

"It seems to be the same sort of suspects," Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers. "Bit of strength from the mining stocks...in the oils as well. There is also something on the Asian front."

"There were concerns that after the Olympic games some of the Chinese economy might start to drop off the cliff slightly but it looks very much like that isn't going to be the case." "Underneath all that, trading volumes are very thin. The market is reasonably directionless, so you do get those slight swings in volatility."

Minutes from the Bank of England's August meeting at 0830 GMT will be eagerly watched for clues on future interest rates.

Banking shares remained volatile after recent heavy losses. Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz), Lloyds TSB (LLOY.L: Quote, Profile, Research, Stock Buzz) and HBOS (HBOS.L: Quote, Profile, Research, Stock Buzz) slipped 0.2-1.3 percent, while Standard Chartered (STAN.L: Quote, Profile, Research, Stock Buzz) and HSBC (HSBA.L: Quote, Profile, Research, Stock Buzz) added 1.1 and 0.6 percent respectively.

Barclays (BARC.L: Quote, Profile, Research, Stock Buzz) slipped 3.9 percent after President Bob Diamond said the bank would consider buying a U.S. wealth management company but was highly unlikely to bid for an investment bank, the Financial Times reported.  Continued...