FTSE hits one-week closing high on Dubai bailout

A man walks past the London Stock Exchange in the City of London October 27, 2008.

LONDON (Reuters) - Britain's top share index closed at its highest level in a week on Monday, led by banks, after Abu Dhabi bailed out Dubai with $10 billion in surprise aid, with commodities stocks also notching up solid gains.

The FTSE 100 .FTSE closed up 53.77 points at 5,315.34, its highest close since December 4, adding to a rise the previous session when it ended up 17.20 points, or 0.3 percent.

"A decent sort of move -- it got a lift this morning with the bailout to some extent for Dubai World, so I think that's relieved a few anxieties," said Mike Lenhoff, a strategist at Brewin Dolphin.

Banks were in demand as investor concerns over their exposure to Dubai's debt problems eased. Standard Chartered (STAN.L) fared best, up 4.3 percent, supported too by a Credit Suisse upgrade, while HSBC (HSBA.L), Barclays (BARC.L) and Royal Bank of Scotland (RBS.L) added 1.3 to 2.4 percent.

Dubai said funds provided by Abu Dhabi would help toward repaying a $4.1 billion Islamic bond maturing on Monday, while the excess would be used to meet state-owned conglomerate Dubai World's needs up until the end of April 2010.

But Lloyds Banking Group (LLOY.L) lost 1.9 percent. Lloyds completed a record 13.5 billion pound ($21.9 billion) rights issue on Monday, ending a turbulent period for the bank and shifting investor focus to a potential government stake sale in 2010.

However other financial sector shares found support, with London Stock Exchange (LSE.L) the top FTSE 100 riser, up 9.9 percent as worries that shareholder Dubai Bourse might have to sell its stake in the British firm receded.

Insurers Prudential (PRU.L), Aviva (AV.L), and Standard Life (SL.L) added 0.1 to 2.7 percent.

MINERS, OILS GAIN

Heavyweight commodity stocks gained too as the demand picture continued to improve, helped still by last week's solid data from major consumer China.

Among the miners, Lonmin (LMI.L), Vedanta Resources (VED.L), BHP Billiton (BLT.L), Anglo American (AAL.L), Rio Tinto (RIO.L) and Xstrata (XTA.L) added 1.3 to 3.7 percent against a backdrop of firmer metals prices.

Oil majors BG Group (BG.L), BP (BP.L) and Royal Dutch Shell (RDSa.L) added 0.9 to 1.6 percent, despite a slightly weaker crude price.

Whitbread (WTB.L) stood out among individual gainers, up 3.8 percent, after the hotels to coffee shops operator said in a trading update that it expected its 2009/10 results to "somewhat exceed" market estimates.

"The market has been consolidating for some six weeks now and the usual December gains have not materialized," said Angus Campbell, head of sales at Capital Spreads.

"This sideways trend means there could be an expansive move in either direction very soon, however it's unlikely to be before Christmas and may even coincide with the New Year."

The index is up about 54 percent from a six-year low hit in March, though is still 1.9 percent below its level of mid-September 2008, before the collapse of Lehman Brothers.

British Airways BAY.L dipped 0.2 percent. Thousands of BA cabin crew voted to strike, hours after the airline revealed a 3.7 billion pound ($6 billion) hole in its pension fund that will require deft handling by management if a proposed merger with Iberia IBLA.MC is to stay on track.

With no significant economic data released in the UK, or due in the United States on Monday, the macro focus was on the latest two-day Federal Reserve meeting, which kicks off on Tuesday, with an interest rate decision due after the London close on Wednesday.

(Additional reporting by Simon Falush; Editing by Rupert Winchester)