Shares rally as doubts over Middle East start to subside

BRITAIN&rsquo;S top shares ended 2.3 per cent higher yesterday and posted their biggest daily gain in 4-1/2 months, with banks and commodity shares rising as worries over Dubai&rsquo;s debt problems faded.<br /><br />The FTSE 100 closed up 121.49 points at 5,312.17, its best one-day percentage gain since July 15. On Monday, the index fell 1.1 per cent, its lowest close in three weeks.<br /><br />Investors&rsquo; nerves were soothed by plans by Dubai World to restructure about $26bn in debt out of the estimated total of $59bn which it owes.<br /><br />Sentiment was also improved by strength on Wall Street following positive US economic data and the Bank of Japan&rsquo;s move to offer more short-term funds to banks.<br /><br />&ldquo;It seems the story regarding Dubai may well be winding down now as the markets managed to move higher. However the caution will remain as the potential for more surprises still remains,&rdquo; said James Hughes, market analyst at CMC Markets.<br /><br />Mining stocks were the biggest gainers as metals prices rose on the back of upbeat manufacturing data from China, with gold hitting a record high. <strong>Anglo American, Xstrata, Fresnillo</strong> and <strong>Eurasian Natural Resources</strong> put on 4.4 to 7.5 per cent.<br /><br /><strong>Eurasian Natural Resources </strong>was also helped by a move by Bank of America Merrill Lynch to add the miner to its developed and emerging Europe 1 list.<br /><br />Meanwhile three owners of <strong>De Beers</strong>, 45 percent owned by <strong>Anglo American</strong>, have agreed in principle to inject up to $1bn in the company through a share issue.<br /><br />Banks were mostly higher as worries over their exposure to Dubai&rsquo;s debts eased. <strong>Royal Bank of Scotland, HSBC, Barclays</strong> and <strong>Standard Chartered</strong> gained 1.3 to 5.2 per cent.<br /><br /><strong>Lloyds Banking Group</strong> bucked the trend, losing 1.8 per cent as KBW slashed its target price to 65p from 105p. The bank was pushing ahead this week with its record rights share offer, which was priced last week at 37p a share to raise &pound;13.5bn.<br /><br />Oil majors added their support as crude prices firmed above $78 a barrel, with <strong>BP, BG Group,</strong> and <strong>Royal Dutch Shell</strong> up 2 to 2.4 per cent.<br /><br />Among individual risers, <strong>Hammerson</strong> rose 4.7 per cent as Morgan Stanley resumed coverage of the stock with an &ldquo;overweight&rdquo; stance.<br /><br />Within the sector, <strong>British Land, Land Securities Group, Liberty International</strong> and <strong>Segro </strong>added 2.8 to 3.9 per cent.<br /><br />Among a handful of fallers, <strong>TUI Travel </strong>shed 1.1 per cent after its in-line full-year results failed to live up to high market expectations after a strong run by the stock ahead of the numbers. Peer <strong>Thomas Cook</strong> lost 0.1 per cent.<br /><br />The market also got support from macro-economic data.<br /><br />&ldquo;Today&rsquo;s flurry of positive data has given the markets fresh fodder to chew on, prompting a nifty recovery,&rdquo; said Philip Gillett, sales trader at IG Index.<br /><br />Data from the US showed that pending sales of previously owned US homes rose unexpectedly to their highest level in 3-1/2 years in October.<br /><br />The US manufacturing sector grew in November for the fourth consecutive month, but at a slower pace than anticipated.<br /><br />On the UK economic front, data showed British manufacturing activity grew more slowly than expected in November and there were signs that the sector&rsquo;s fledgling recovery might have lost some pace.