* FTSE 100 closes up 1.2 pct at 3-wk highs
* Index on track for sixth month of gains
* Rio Tinto top gainer after cost-cutting plan
By Toni Vorobyova
LONDON, Nov 29 Britain's FTSE 100 scaled
three-week highs on Thursday, cheered by promises of spending
cuts at miner Rio Tinto and by growing hopes of achieving a U.S.
budget deal to avoid recession in the world's biggest economy.
The U.S. 'fiscal cliff' of some $600 billion in spending
cuts and tax hikes that is otherwise due to come into force in
2013 has overtaken the euro zone crisis as the top concern for
investors. U.S. House of Representatives Speaker John Boehner
sparked a rally in global risk assets after he voiced optimism
on Wednesday that a compromise could be reached.
President Barack Obama added to the positive mood, saying he
hoped to get a deal done in the next four weeks.
"The general mood of the market is reasonably positive,"
said Neil Marsh, strategist at Newedge.
"There is probably going to be a little bit of volatility
surrounding the 'will they, won't they', but ultimately they
will - they have to ... If they don't come up with a deal, what
will happen not just to the U.S. economy but the world economy
The FTSE 100 closed up 1.2 percent, or 67.02 points, at
5,870.30, hitting levels last seen on Nov. 7 and heading for its
sixth straight month of gains.
Steve Asfour, head of sales trading at Fox Davies Capital,
said the strong run could continue into end-212, taking the UK
benchmark towards the psychologically key 6,000 mark before a
fresh push lower in the new year.
From a technical point of view, however, the FTSE 100 is
likely to face tough resistance around the 5,930 area, where it
has run out of steam three times in as many months.
Miner Rio Tinto, the 10th-biggest stock in the FTSE
100, added 5.1 percent, after setting out clear plans for
operational cost cuts and voicing guarded optimism on demand
from key market China.
"It isn't just that they talked about cutting capex and
operating costs and ... they have come up with some quite big
numbers, but they have also emphasised that they are going to
have a bit more of a focus on returning cash to shareholders,"
said Tom Gidley-Kitchin, analyst at Charles Stanley.
"What we are seeing is financial discipline and a supply
response from the industry to more uncertain, lower growth in
the short-term ... It is just one company, but I think that's
why sentiment has improved and a lot of share prices are up."
The FTSE 350 mining sector added 3.1 percent,
boosted by Rio but also taking heart from the growing optimism
on the U.S. 'fiscal cliff'.
"There is a fog of uncertainty relating to fiscal cliff,
euro zone prospects and - although this is less of a worry
recently - the maintenance of Chinese growth," said
"The mining companies acknowledge that, and so does everyone
else. I think the right response in the short term is not to
continue to go flat out, and to proceed with a certain amount of