Miners lead UK stocks rally on 'fiscal cliff' deal

* FTSE 100 gains 1.4 percent on first session of 2013

* Miners lead advance as copper price jumps

* Banks in demand; Barclays helped by target hike

* Wm.Morrison blighted by negative broker comment

LONDON, Jan 2 (Reuters) - Britain's top share index jumped

higher on the first trading session of 2013 after U.S. lawmakers

approved a deal preventing massive tax hikes and spending cuts,

boosting the outlook for the new year.

The Republican-controlled House of Representatives late on

Tuesday finally approved a bill that will raise taxes on top

U.S. earners, fulfilling President Barack Obama's re-election

promise and avoiding the "fiscal cliff" of $600 billion in

broad-based tax hikes and spending cuts which threatened to drag

the U.S. economy into recession.

At 0832 GMT, the FTSE 100 index was up 80.39 points, or 1.4

percent, at 5,978.20, having ended a thinly traded half-day

session on Monday, New Year's Eve down 0.5 percent as traders

awaited news on the negotiations.

"Investors are trading with a sense of relief this morning

after lawmakers in Washington agreed on a compromise to avoid

the fiscal cliff that has been the dominant theme in equity

markets since the Presidential elections back in November," Mike

McCudden, Head of Derivatives at stockbroker Interactive

Investor said.

"There will no doubt be a few more twists and turns in the

days ahead as the bears pour over the detail of the compromise

that has been struck on Capitol Hill but for now investors have

the concrete news they were hoping for," McCudden added.

Asia stocks rose strongly, copper prices hit a

two-week high, and Brent crude reached a one-month peak

on Wednesday after the deal, with upbeat manufacturing data from

top commodities consumer China also helping.

China's official manufacturing purchasing managers' index

held steady in December at 50.6, matching November's seven-month

high, adding to evidence that the world's second-largest economy

was headed towards a steady revival in growth.

Miners led the blue-chip gainers, contributing

almost 20 points of the FTSE 100's advance, boosted by the jump

in commodity prices.

Banks were also in demand, with Barclays

the top blue-chip gainer, up 4.0 percent, with traders

saying the stock was also helped by a price target hike from

Investec Securities to 285 pence, up from 260 pence.

MORRISON MAULED

There were just two blue chip fallers, with WM Morrison

the worst off, down 0.7 percent, with the food retailer

impacted by some negative broker comment, including a cut to

estimates and its price target by Jefferies International.

"Recent market share updates have highlighted soft trading

momentum at Morrisons. We believe this likely reflects consumers

trading down to discounters and continued online share shift. We

now assume Christmas LFL sales (to be reported on 7 January) to

have fallen by 2.8 percent, prompting a 3/4 percent cut to

mid-term estimates and a reduction in our 2013 target ambition

to 310 pence," Jefferies said in a note.

British American Tobacco, was the only other FTSE

100 faller, down 0.6 percent.

Ex-dividend factors clipped 0.27 points off the FTSE 100

index on Wednesday, following a price adjustment by market

makers, with credit checking firm Experian trading

without entitlement to its latest dividend payment.

Although the market mood seemed euphoric as 2013 kicked off,

commentators were still cautious for the near term.

"It's only a matter of time before market participants lose

their buzz as U.S. lawmakers will have to reconvene to address

the remainder of unresolved issues. Judging by the disruptive

game of brinkmanship US lawmakers played in the final weeks of

2012, markets have lost their trust in U.S. politicians," Joe

Rundle, head of trading at ETX Capital said.

(Reporting by Jon Hopkins; Editing by Toby Chopra)

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