December 21, 2017 / 5:31 PM / 6 months ago

UPDATE 1-Santa's gift to the FTSE: 7,600 points

* Commodity stocks sustain index gains

* Housebuilders hit by government leasehold proposal (Recasts, adds details, closing prices)

By Danilo Masoni and Helen Reid

MILAN/LONDON, Dec 21 (Reuters) - Britain’s top stock index shot up to a record high on Thursday in thin pre-holiday trade, supported by buoyant commodity stocks and a late dip in the pound.

The FTSE 100 rose above the 7,600 points mark for the first time, ending up 1.1 percent and outperforming mild gains seen in the broader European market.

“Everyone was expecting a Santa rally and because of that they’re not selling: it’s a self fulfilling prophecy,” said Forex.com market analyst Fawad Razaqzada in London.

“The lack of any significantly bearish news is keeping the bull run intact. You have a lot of reasons why it’s going up and little reasons why it shouldn’t,” he added.

Razaqzada said the lack of volumes exacerbated price moves.

The internationally exposed FTSE has been supported throughout 2017 by persistent weakness in the pound following the country’s decision to leave the European Union.

The run in the internationally exposed index however has concealed broader worries about Britain’s slowing economy and uncertainty over the outcome of lengthy Brexit negotiations.

British consumer morale sank to a four-year low this month, bucking economists’ expectations for it to hold steady and extending this year’s downward trend as inflation crimped household spending, Gfk data showed.

“It could be that we are at the worst point, but certainly when you contrast it with other regions there’s a stark divergence and that leaves us neutral on UK equities,” said Mike Bell, global market strategist at JPMorgan Asset Management.

The pound has recovered from the lows hit in the aftermath of the Brexit referendum in June 2016 but it is still down 10.7 percent against the dollar since the vote. The FTSE has gained 6.5 percent this year but in euro-adjusted terms it is up only 1.4 percent and well below its previous record high.

On Thursday, the last full trading day before the Christmas holidays, the energy sector contributed the most to gains in the FTSE with shares in BP and Royal Dutch Shell rising 2.1 and 1.6 percent respectively.

A recovery in heavyweight British American Tobacco, up 1.9 percent, also provided support as investors calculated the extent to which U.S. tax reform could help U.S.-exposed companies.

Miners Glencore and BHP Billiton also made gains.

The mid cap index rose 0.4 percent, underperforming blue chips, weighed by a 9 percent tumble in McCarthy & Stone , Britain’s biggest builder of homes for retirees.

The Department for Communities and Local Government proposed to reduce ground rents on new long leases to zero.

McCarthy & Stone said it had made a case to DCLG for the exemption of retirement housing providers from the policy.

Large-cap housebuilders Persimmon, Berkeley Group , Barratt Development and Taylor Wimpey also fell 0.2 to 0.9 percent.

Builder Balfour Beatty bucked the sector trend, up 2 percent after the firm nudged up expectations for year-end profit, saying the sale of 12.5 percent of its stake in M25 motorway operator Connect Plus would boost its bottom line and generate funds to pay down debt. (Reporting by Danilo Masoni; Editing by Robin Pomeroy)

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