FTSE up after Dubai bailout

London’s FTSE 100 Index posted healthy gains today after Dubai’s £6bn (€6.7bn) emergency bailout from Abu Dhabi soothed nerves around financial stocks.

The Footsie rose 1% or 52.6 points to 5314.4 by lunchtime amid relief over the Middle East situation after oil-rich Abu Dhabi handed over rescue cash to help Dubai pay debts owed by its struggling Dubai World conglomerate.

This gave a boost to financials, while the London Stock Exchange – which is nearly 21% owed by Dubai State-owned company Borse Dubai – was the biggest riser with an 9% gain, up 65p to 759.5p.

The LSE had been hit recently amid fears that Borse Dubai may be forced to sell its stake in the group.

Banks rallied on relief over Dubai, having been weighed down by concerns over their exposure to the emirate’s debts.

Standard Chartered rose 57p to 1566.5p, HSBC lifted 16.1p to 719.5p and Barclays gained 5.3p to 293.3p.

Lloyds Banking Group offered a further boost to the sector after it revealed 95% take-up for its £13.5bn (€15bn) rights issue and later said the remainder of the shares had been snapped up in the open market.

Lloyds shares were down 0.8p at 55.4p.

Meanwhile, a robust defence from Cadbury to its US suitor’s hostile bid put the chocolate giant in the spotlight.

Shares rose 4p to 794.5p after the confectionery firm replied to Kraft’s hostile £10bn (€11.1bn) offer by upping long-term performance targets.

Leisure group Whitbread was another strong riser after “outstanding” trading at its coffee business Costa and a revival at Premier Inn led it to forecast profits ahead of City hopes. Shares gained 4%, or 53p to 1383p.

But British Airways was on the list of share fallers, down 0.3p at 201p, after it said its pension deficit had grown 76% to £3.7bn (€4.1bn) over the last three years – news which comes as it awaits the results of a union strike ballot.

Outside the top flight, shares in outsourcing firm Mouchel surged 26%, or 49p to 239p, after it said it had rejected takeover interest. The party involved, fellow services firm VT Group, saw its shares fall 15p to 526.5p.

Another firm in the takeover spotlight, waste disposal group Shanks, was 5.1p higher at 135.1p as the stock crept closer to the 150p level suggested as a suitable bid price by its board. The company is being courted by a private equity firm.