Britain's FTSE greets new record as banks rally

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* FTSE 100 up 0.3 pct at new record

* RBS (LSE: RBS.L - news) leads banks after upgrade

* Sainsbury (Amsterdam: SJ6.AS - news) 's, Ted Baker (Other OTC: TBAKF - news) rise following Xmas updates

* Spreadbetters hit by FCA warning

By Kit Rees

LONDON, Jan 10 (Reuters) - A rise in banks and oil stocks boosted the UK's top share index to a fresh record on Wednesday as a rise in bond yields supported financials across Europe.

Britain's blue chip FTSE 100 index was up 0.3 percent at 7,750.58 points by 0957 GMT, outperforming the broader European market, while mid caps declined 0.3 percent.

British banks joined in a rally with European peers as bond yields rose.

"When there's movement in the bond yields, the UK banks do benefit from that in a number of ways. Firstly, they make higher revenues in terms of their returns," John Moore, trader at Berkeley Capital, said.

"We think UK banks could do quite well despite the uncertainty, purely because we see them as undervalued."

Shares (Berlin: DI6.BE - news) in Royal Bank of Scotland led the banking sector, up 3.4 percent after broker Morgan Stanley (Xetra: 885836 - news) upgraded its rating on the stock to "overweight".

Morgan Stanley said that RBS offered the most resilience in an uncertain outlook.

Shares in peers HSBC and Standard Chartered (BSE: 580001.BO - news) also gained more than 2 percent.

Wednesday was another day dominated by Christmas updates from retailers, with shares in grocer Sainsbury's advancing 1.5 percent after it beat forecasts slightly in its Christmas trading update.

"Sainsbury's has delivered reassuring trading through what, post the Argos acquisition, is its key quarter for sales and profitability," analysts at UBS (LSE: 0QNR.L - news) said in a note.

This continues a positive theme for food retailers over the festive period as shoppers resisted cutting back on food purchases despite inflationary pressures on the consumer.

Peer Morrisons saw its shares rise in the previous session after its own update.

Elsewhere a well-received Christmas update sent shares in Ted Baker 8.2 percent to the top of the mid cap index.

Housebuilder Taylor Wimpey found itself at the bottom of the FTSE 100, however, down 3.6 percent on the back of a trading statement.

The housebuilder said that it saw its full-year results for 2017 to be in line with expectations.

Elsewhere a warning from the UK's Financial Conduct Authority (FCA) put pressure on shares in spreadbetters, with IG Group dropping more than 4 percent, Plus500 down 4 percent and CMC Markets (LSE: CMCX.L - news) down 5 percent.

The FCA said that there are "areas of serious concern" in Britain's contracts for differences (CFDs) market, following a review.

(Reporting by Kit Rees; editing by Mark Heinrich)