European shares rebound from sharp fall in previous session

Rising bank stocks led a broad rebound in European shares yesterday from the steep fall in the previous session triggered by concerns over Dubai's debt.

The pan-European FTSEurofirst 300 index of top shares ended up 1.2 per cent at 999.59 points following a 3.3 per cent fall on Thursday - the biggest daily decline in seven months - which traders felt was overdone.

Banks added the most points to the index, though nearly every sector gained.

BNP Paribas, Banco Santander, Barclays, Credit Suisse, Deutsche Bank and UBS rose between 1.2 and 2.8 per cent.

Dutch bank and insurer ING fell 4.3 per cent after pricing a deeply-discounted rights issue to reduce its dependence on state aid.

Over the week, the European benchmark fell 0.3 per cent. But it is up nearly 55 per cent from a record low in early March, buoyed by several major economies emerging from recession.

Analysts are divided over the likely fallout from the Dubai debt crisis many believed the market had overreacted.

"Dubai is a very special case," said Heino Ruland, strategist at Ruland Research, in Frankfurt.

"It's a very specific problem, which can't be transferred to other markets. Market participants will realise that this has nothing to do with the global crisis."

Banks outside the Gulf played down their exposure to Dubai and European leaders said the world economy was now strong enough to cope with the setback.

The crisis began on Wednesday when Dubai, one of the United Arab Emirates, asked to delay payment on billions of dollars of debt issued by conglomerate Dubai World and its main property subsidiary Nakheel.

Energy stocks also turned around as crude prices pared losses for the day to less than three per cent, taking them above $75 a barrel. ENI, BP, Royal Dutch Shell and Total were up between 0.5 and two per cent. Across Europe, Britain's FTSE 100 ended the day one per cent higher; Germany's DAX and France's CAC-40 rose 1.3 and 1.2 per cent respectively.

"The markets have found stability today after things were looking a little dire after yesterday's big sell-off and a continuation of the selling earlier this morning," said Angus Campbell, Head of Sales, Capital Spreads. Carphone Warehouse, Europe's biggest mobile phone retailer, rose 1.3 per cent after raising its earnings forecast and expressing confidence about Christmas trading. Miners gained as gold prices bounced from one-week lows, other metals rose and the dollar trimmed gains.

BHP Billiton, Lonmin, Rio Tinto, Vedanta and Xstrata rose between 1.6 and 4.9 per cent.

Wall Street was lower around the time European bourses were closing.

The Dow Jones, S&P 500 and Nasdaq Composite were down between 0.9 and 1.1 per cent.

Investors will watch for evidence of US consumer spending patterms.

Black Friday, the day after Thanksgiving, is often the single busiest shopping day of the crucial holiday season, which accounts for nearly one-fifth of the retail industry's annual sales.