* FTSE 100 up 0.3%, FTSE 250 down 0.7%

* BP gains on stronger trading, refining margin outlook

* Soft U.S. inflation data lifts risk appetite

(Updates to market close)

July 14 (Reuters) - Britain's FTSE 100 closed higher on

Tuesday, reversing early losses, as bank stocks led gains after

strong U.S. lender earnings kicked off the reporting season and

a softer-than-expected U.S. inflation reading boosted bets on

interest rate cuts.

The FTSE 100 ended up 0.3%, at 10,529.39, having

earlier fallen as low as 10,422.98. The FTSE 250 midcap index

was about flat at 23,406.83.

* Wall Street banks posted strong second-quarter earnings

with a boost from fees for advising on deals and surging trading

‌revenue, lifting their peers across the pond. In the UK,

Barclays ( BCS ) and HSBC ( HSBC ) both gained 1.9%, while

Lloyds added 1%, offering the top boost to the FTSE

100.

* Glencore ( GLCNF ) rose 3%, Rio Tinto gained 3.3%

and Anglo American added 2.4% on strength in industrial

metals prices.

* Energy stocks provided further support after BP

rose 2.2%, saying robust oil trading and higher refining margins

would lift ‌second-quarter earnings. Shell gained 1.2%

as Brent crude held above $85, near four-week highs.

* Earlier, investor sentiment was dampened by growing bets

on Bank of England rate hikes, higher oil prices amid Gulf

tensions, and comments from a top Federal Reserve official that

pointed to a near-term rate increase.

* Meanwhile, U.S. consumer inflation slowed more than

expected in June, tempering expectations for U.S. Federal

Reserve policy tightening and further boosting U.S. stocks.

* Healthcare stocks were the biggest drag. GSK fell

1.7% and AstraZeneca ( AZN ) declined 2%.

* Debenhams Group rose 3.1% after the online

retailer said positive trading momentum continued through June

and July.