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Miners, banks drive FTSE to 30-month closing high

Published 12/21/2010, 12:50 PM
Updated 12/21/2010, 12:52 PM
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* FTSE 100 index gains 1 percent

* Miners firm; copper price rises to record

* Banks gain as euro zone debt worries fade

By Tricia Wright

LONDON, Dec 21 (Reuters) - Miners and banks drove Britain's top share index to a 30-month closing high on Tuesday, as risk appetite rose due to easing tensions on the Korean peninsula and upbeat earnings from U.S. software maker Adobe Systems.

The FTSE 100 index ended up 60.19 points, or 1 percent, at 5,951.80, its highest close since early June 2008, albeit in thin trade in the run-up to the Christmas holidays.

Miners rose, with Anglo American and Xstrata the best sector performers, up 4.2 percent and 3.5 percent respectively, as copper hit record highs, fuelled by supply concerns.

Gains in metals prices were also underpinned by import data showing continued strong demand from top consumer China, prompting more speculation on the global growth story.

Rio Tinto climbed 2.6 percent amid media reports that it is talking to Australia-listed coal miner Riversdale about a higher $3.8 billion takeover, ahead of a possible bidding war.

Traders said investor nerves were soothed as the situation on the Korean peninsula failed to escalate. South Korea held live-fire drills on Yeonpyeong island on Monday, raising fears of all-out war, but the North did not retaliate.

"It's an all round risk-on day ... the main story is the diminishing tension on the Korean peninsula," Michael Hewson, market analyst at CMC Markets, said.

Integrated oil stocks found favour as the crude price rose, supported by cold weather conditions, with Royal Dutch Shell climbing 1.6 percent.

BANKS BOUNCE

Banks rebounded after recent weakness caused by euro zone debt exposure fears. Comments from a Chinese vice-premier that it supports efforts by the EU to calm global markets in the wake of the debt crisis helped ease concerns.

Royal Bank of Scotland was the top FTSE 100 riser, up 4.5 percent.

Carnival was another strong gainer, up 3.7 percent, on higher earnings and forecasts from the cruise operator.

Traders said the general mood was brightened by solid results from Adobe Systems.

"Adobe's results are better than expected which is boosting overall confidence," Mic Mills, head of electronic trading at ETX Capital, said.

Positive broker sentiment helped Rolls-Royce, 2 percent firmer, with Citigroup lifting its rating to "buy".

Aggreko was the biggest FTSE 100 faller, off 2.9 percent, after a price target cut by Credit Suisse and as investors booked profits in the temporary power supplier after a rise on Monday prompted by a contract win.

BSkyB fell 0.7 percent, reversing direction, after British Business Secretary Vince Cable said he has "declared war" on media magnate Rupert Murdoch, raising question marks over the likelihood of Murdoch's News Corp succeeding in taking full ownership of the pay-TV operator.

(Editing by David Hulmes)

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