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Firm banks, commods drive FTSE higher

Published 12/21/2010, 04:27 AM
Updated 12/21/2010, 04:32 AM
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* FTSE 100 index up 0.8 percent hitting fresh 30 month high

* Banks rally as recent euro-zone debt worries ease

* Miners, oils lifted by firmer commodity prices

By Jon Hopkins

LONDON, Dec 21 (Reuters) - Britain's leading shares index pushed higher in early deals on Tuesday, driven by good gains in banks and commodity issues, though volumes were once again thin ahead of the holiday period.

At 0912 GMT, the FTSE 100 index was up 45.16 points, or 0.8 percent at 5,936.77, just below a fresh 30 month peak reached early on, having added 0.3 percent on Monday.

"The market continues to look forward to 2011 when we expect the market to react to three global dynamics: the macro picture will continue to improve; the corporate picture will remain bright; and emerging markets should continue to grow," said Henk Potts, market strategist at Barclays Wealth.

"We've had a good run during this year ... but valuations still look cheap and investors should get excited about the prospects for next year," added Potts.

Banks bounced back after recent weakness caused by euro zone debt exposure worries, with comments from a Chinese vice premier that China supports efforts by the EU to calm global markets in the wake of Europe's debt crisis helping ease concerns.

Barclays was the top sector gainer, up 2.3 percent, while Royal Bank of Scotland and Lloyds Banking Group added 2.2 percent and 1.5 percent respectively.

British Business Secretary Vince Cable has considered ways to shed more light on how bankers are paid as bosses from RBS, Barclays, Lloyds, and HSBC prepare to meet him today.

Commodity stocks also provided strong support for the blue chips as crude oil and metals prices pushed higher, with copper up to record levels, fueled by demand factors.

Silver miner Fresnillo was the biggest blue chip riser, up 3.2 percent, while Xstrata added 2.5 percent.

Rio Tinto gained 2.2 percent. Media reports said Rio is talking to Australian-listed coal miner Riversdale about a higher $3.8 billion takeover bid, ahead of a possible bidding war for target.

Among the integrated oils, BP and Royal Dutch Shell gained 0.4 and 0.8 percent respectively, but BG Group fell 0.7 percent.

ROLLS WANTED

Among individual blue chip gainers, Rolls-Royce added 1.8 percent boosted by an upgrade to "buy" from Citigroup.

On the downside, defensively-perceived stocks featured among the main FTSE 100 fallers, reversing Monday's gains as investors risk appetite returned, with utility International Power among the worst off, down 0.7 percent.

The snowy weather conditions continued to take their toll on travel-related issues, with TUI Travel down 0.4 percent, as airports see delays and cancellations for several more days.

But retailers, which suffered on Monday on fears that customers were failing to get the last minute Christmas shopping done due to the snow, managed to rally on hopes for a thaw, with Next and Marks & Spencer both up 0.2 percent.

British consumer confidence remained steady at its lowest level since July this month as a rise in shoppers' willingness to buy big-ticket items offset growing pessimism over the economy, a survey showed on Tuesday. (Editing by Hans Peters)

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