European stocks bounced back on Tuesday, boosted by banks and commodity shares, as encouraging economic data and easing concerns over Dubai's debt problems prompted investors to increase their exposure to equities.
At 1210 GMT, the FTSEurofirst 300 index of top European shares was up 2.1 percent at 1,005.84 points after rising as high as 1,006.00 earlier in the session. The index slipped 1.4 percent in the previous session on Dubai concerns.
Efforts by Dubai World to restructure about $26 billion in debt out of the estimated $59 billion it owes reassured investors that the emirate's debt problems can be contained.
Dubai World, the government-controlled conglomerate that led the transformation of Dubai into a regional hub for finance, investment and tourism, unveiled details of a restructuring plan late on Monday that would cover debt owed by its main property firms, Nakheel and Limitless.
Financials were among the biggest gainers, with the DJ STOXX banking index climbing 2.3 percent. Standard Chartered, HSBC, Barclays, Royal Bank of Scotland, BNP Paribas, Natixis, UBS and KBC Groep jumped 1.4 to 7.1 percent.
"I think the Dubai topic is over," said Anko Beldsnijder, managing director of MainFirst Asset Management in Frankfurt. "We are still in a positive market environment.
"Probably people were not willing to buy in the last month, but with a new month now you immediately see strong buying coming in. We expect markets to rally into the year end."
Greek banks, hit hard last week on worries over funding, also gained. EFG Eurobank, National Bank of Greece and Bank of Piraeus added 6 to 6.6 percent.
In Japan, the central bank offered more short-term funds to banks after an emergency meeting, winning an immediate reprieve from government pressure to help avert recession before upper house polls next year.
Investor appetite for risky assets such as equities rose, with the VDAX-NEW volatility index falling 6.5 percent. The lower the index, which is based on sell and buy options on Frankfurt's top-30 stocks, the higher the market's desire to take risk.
ECONOMIC DATA SUPPORTS
Investors also drew comfort from positive macroeconomic data, with German jobless figures showing an unexpected fall in November and euro zone PMI numbers getting revised higher.,
Figures also showed that the Swiss economy pulled out of recession in the third quarter, thanks in part to robust private consumption, while a jump in PMI data to a 20-month high confirmed the economy is recovering faster than expected.
Commodity shares were in demand as crude oil rose 1.3 percent to trade above $78 a barrel, spot gold hit a record high near $1,200 an ounce and copper rose to within a whisker of 14-month highs on a weaker dollar and easing fears of contagion from the debt crisis in Dubai.
"The (equity) market is acknowledging that the Dubai crisis is contained to the region itself," said Heino Ruland, strategist at Ruland Research, in Frankfurt.
"Banks in the U.S. rallied in the last hour of trade and that optimism has been transferred to Europe," he added.
Among miners, BHP Billiton, Anglo American, Antofagasta, Rio Tinto, Xstrata and Eurasian Natural Resources rose 1.2 to 4.9 percent.
Oil majors BP, Royal Dutch Shell, BG Group, Tullow Oil, Repsol, Total and StatoilHydro added 1.1 to 2.5 percent.
Vivendi rose 3.2 percent. General Electric Co and Vivendi have agreed in principle to a deal in which GE would buy the French company's 20 percent stake in NBC Universal for $5.8 billion.
The benchmark European shares index is up 21 percent in 2009 and has surged 56 percent since hitting a record low in March.
Across Europe, Britain's FTSE 100 index, Germany's DAX and France's CAC 40 rose 1.6 to 2.0 percent.
