UPDATE 1-Britain's FTSE hits one-month high as banks and miners lead cyclical charge

* FTSE 100 up 1.8 pct

* Banks hit 1 1/2-year high

* Rio benefits from Credit Suisse upgrade

* WPP falls on reported DOJ probe (Recasts, adds detail and updates prices at close)

By Kit Rees and Alistair Smout

LONDON, Dec 7 (Reuters) - Britain's top share index rose toa one-month high on Wednesday, rallying for a third straightsession as investors snapped up bank and mining stocks androtated out of more "defensive" parts of the market.

The British FTSE 100 was up 1.8 percent to 6,902.23points at its close, its highest closing level since Nov. 9.

Financials contributed 47 points to the rise, supported bygains in euro zone lenders. Italian banks continued to rally offof lows hit after the Italian prime minister said he wouldresign after voters rejected his reforms in a referendum.

Barclays rose 3.6 percent, its highest level thisyear. Royal Bank of Scotland rose 3.9 percent to itshighest point since Britain voted in June to leave the EuropeanUnion.

In all, banks were up 3.9 percent, reaching a 11/2-year high. Lloyds and Standard Chartered led the sector, both gaining more than 4 percent.

"In the UK but also more broadly, people are rotating intofinancials on expectations of higher inflation and higheryields," said Jasper Lawler, senior market analyst at LondonCapital Group, adding that the European Central Bank could helpto support the sector when it meets on Thursday.

Mining stocks were also strong gainers, with Rio Tinto the top gainer on the FTSE 100, up 6.6 percent as itbenefited from an upgrade by Credit Suisse.

The global miner was lifted to "outperform" from "neutral"by the Swiss bank, who raised its target price on the stock to3,600 pence from 2,750 pence.

Peer BHP Billiton rose 3.9 percent, buoyed by risingcopper prices, but lagged as it was downgraded to "neutral".

"With an improvement in laggard commodities like thermalcoal and copper (and, to a lesser extent, aluminium), and withiron ore exhibiting less downside risk versus coking coal forBHP, we believe Rio now has the better earnings outlook for theyear ahead," analysts at Credit Suisse said in a note.

Among fallers, advertiser WPP dropped 2.8 percentafter a report that the U.S. Justice Department wasinvestigating the industry.

Stocks such as consumer staple Unilever and pharmafirm Shire dropped as investors moved out of "expensivedefensives" to take on more risk. Unilever was knocked by adowngrade from JP Morgan, while Shire suffered from a downgradeby UBS.

Healthcare stocks were also hit after U.S. President-electDonald Trump said that he would "bring down drug prices", withshares in midcap Indivior falling almost 5 percent.

However, while analysts are cautious over possible marketshocks following a series of political upsets this year,according to a Reuters poll of strategists, brokers and analyststaken over the past week. It showed that European shares areexpected to rise steadily in 2017. (Reporting by Kit Rees and Alistair Smout, editing by LarryKing)