FTSE extends gains on EU leaders' new found urgency

* FTSE up 2.1 percent

* Banks gain on Europe debt hopes

* Miners rally as Nomura talks up valuations

* Randgold falls on output cuts

By David Brett

LONDON, Nov 28 (Reuters) - Britain's FTSE 100 bounced
back from recent falls by midday on Monday, boosted by hopes
European leaders were prepared to take more dramatic action to
cure euro zone contagion.

Investors welcomed talk that Germany and France are
exploring radical methods of securing deeper and more rapid
fiscal integration among euro zone countries.

And sentiment was lifted after media reports, denied by the
International Monetary Fund, that Italy was in talks with the
IMF over a possible bailout.

"There is still speculation that politicians have a newfound
sense of urgency and are stepping up attempts to stem the
crisis. Unsurprisingly there is a wave of relief flowing through
the financial sector," David Jones, chief market strategist at
IG Index.

The dented banking sector <.FTNMX8350 > rose, with Royal
Bank of Scotland and Lloyds Banking Group up as
much as 5.5 percent, as the "risk on" trade prevailed despite
concerns over the potential for harsher levies on the sector.

London's blue chip index gained 110.90 points, or
2.1 percent to 5,275.55 by 1209 GMT, led by previously hard hit
riskier assets, and extending Friday's 0.7 percent rise.

Volatile trading continued after the FTSE lost more than 7
percent of its value over nine days -- its worst losing streak
since 2003 -- before snapping back on Friday.

Index gains were also helped by the forecasts of a strong
open on Wall Street.

"It will take a few more days of positive moves to convince
traders that this rally actually has some solid foundations and
is not just a dead cat bounce built on rumour and hope," IG's
Jones said.

Analysts noted the FTSE All Share index had given
off positive technical signals - its 14-day relative strength
index turned marginally higher - suggesting a trading bounce,
but added more significant good news would be needed for it to
break above the 2,740 level.

MINERS RISE

Miners rallied as Nomura said the sector had
been hit too hard in the macro sell-off, driven by global growth
worries.

Nomura said the uncertain macroeconomic backdrop had driven
a divergence between sentiment and equity valuations for the
mining sector and offered a buying opportunity, citing Xstrata
, BHP Billiton and Rio Tinto among its
top picks.

"The diversified miners are now trading at valuations near
their global financial-crisis lows, but with repaired balance
sheets and growth catalysts on the horizon."

Xstrata, BHP and Rio climbed as much as 3.9 percent.

Thomson Reuters StarMine data shows Rio Tinto and BHP
Billiton have average annualised per share earnings growth over
the past five years of 6.9 percent and 12 percent respectively.

Their market implied EPS compound annual growth rate over
the next five years, however, or the growth rates investors have
priced into the stock, is minus 8 percent and minus 12.8 percent
respectively.

JP Morgan echoed Nomura's sentiment and said European stock
markets are pricing in too much weakness as a result of the
region's debt crisis.

The broker said corporate earnings should continue to hold
up and remain reasonably highly correlated with those of the
United States.

Upbeat broker comment helped Weir climb 5.1 percent
as Barclays Capital raised its price target on the company and
repeated its "overweight" rating.

BarCap cited three main reasons for its bullish stance on
Weir; its high exposure to multi-year secular growth in shale
oil & gas markets, ongoing strength in mining capex with
aftermarket resilience, and balance sheet strength giving
further opportunities for earnings accretive acquisitions.

Broader macro growth concerns remain after the OECD said the
global economic recovery is running out of steam, leaving the
euro zone stuck in a mild recession and the United States at
risk of following suit, sharply cutting its growth forecasts.

On the downside, Randgold was the only FTSE 100
faller, down 5.5 percent after the gold miner cut its output
target due to a series of problems at its Tongon mine in the
Ivory Coast.

"(It) looks to be a 'perfect storm' at Tongon," Numis says
in a note, adding the stock, rated "hold", is expensive at 2.1
times its net asset value and 13 times its one-year forward cash
flow.

(Additional reporting by Simon Jessop, Francesco Canepa and
Brian Gorman; Editing by David Cowell)

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