British equities recover from Friday's selloff as banks rally

(Reuters) -Bank shares led British equities higher on Monday, rebounding from a sharp selloff on Friday, while investors looked ahead to the prospect of interest rate cuts by the Bank of England later this week.

The blue-chip FTSE 100 rose 0.5% as of 0925 GMT, after logging its biggest percentage drop in almost four months on Friday.

The domestically focused midcap FTSE 250 gained 0.6%.

Shares in British banks surged 2.1% on Monday after the UK's Supreme Court overturned a ruling on motor finance commissions, easing fears of a redress scheme that some analysts had warned could cost tens of billions of pounds.

Lloyds Banking Group shares jumped 7.4%, on track for its biggest daily gain in over nine years.

Close Brothers surged nearly 20%, while Barclays rose 2.3%.

Aerospace and defence gained 2.2%.

Rolls-Royce and BAE Systems were among the top gainers in the FTSE 100, up 2.7% and 1.8%, respectively.

BP rose 1.3% after the energy heavyweight said it has made its largest oil and gas discovery in 25 years in Brazil's Santos basin.

Conversely, Convatec Group fell nearly 2% after the British medical equipment maker said CEO Karim Bitar would take a medical leave of absence.

Auction Technology Group's plunged 19.6% and was the top loser on the FTSE 250, after the online auction operator cut its annual profit margin forecast.

On the radar this week, the Bank of England is widely expected to cut its key interest rate to 4% from 4.25% on Thursday and to lower it once more before the end of the year, despite consumer price inflation rising to close to double the central bank's 2% target in June.

Meanwhile, a sharp downward revision to past U.S. jobs data on Friday, followed by President Donald Trump's decision to fire the head of Labor Statistics added an extra layer of nervousness among investors over the credibility of U.S. economic data.

(Reporting by Sanchayaita Roy in Bengaluru; Editing by Vijay Kishore)