By Michael Patterson Dec. 1 (Bloomberg) -- Stocks rallied from London to Shanghai and the dollar fell as Dubai said half of its debts are “stable” and Chinese manufacturing grew at the fastest pace in five years. The yen fell the most in seven weeks against the dollar, while gold reached a record. The MSCI World Index advanced 1 percent at 10:17 a.m. in London and futures on the Standard & Poor’s 500 Index added 0.9 percent. The dollar weakened against 15 of the 16 most-traded currencies. The yen dropped 0.6 percent versus the greenback on speculation the Bank of Japan will try to limit gains even after keeping interest rates unchanged at an emergency meeting today. Gold rose as much as 1.5 percent to exceed $1,200 an ounce. Dubai is in talks with its lenders to restructure $26 billion of debt, easing concern that a default would boost the $1.7 trillion financial companies around the world have written down as the credit crisis impaired the value of their assets. An HSBC Holdings Plc index showed China’s manufacturing increased last month. U.S. manufacturing probably expanded for a fourth consecutive month in November, according to the median forecast of economists surveyed by Bloomberg News. “The fallout from the Dubai situation and the overall contagion effect should be both short-lived and quite limited,” wrote Suki Mann, a credit strategist at Societe Generale SA in London, in a research note. “We are close to the end of a remarkable year for risky assets, and this is probably the last chance for fast money to make a quick turn.” Banks Rally Europe’s Dow Jones Stoxx 600 Index climbed 2 percent, its biggest gain in more than a week. HSBC, the region’s biggest bank, added 3 percent in London as concern eased that losses from a possible default by Dubai World will spread. BHP Billiton Ltd. led basic-resources companies higher, climbing 2.8 percent. Alstom SA and Schneider Electric SA advanced more than 4 percent in Paris. The companies are in talks to buy Areva SA’s power- grid subsidiary. Asian stocks rose, lifting the MSCI Asia Pacific Index 1.3 percent to a two-week high. Nissan Motor Co., which gets 35 percent of its revenue from North America, gained 3 percent in Tokyo as the yen slumped against the dollar. Baoshan Iron & Steel Co. surged 7.8 percent in Shanghai on speculation steel demand in China will increase. U.S. stock index futures advanced, indicating the S&P 500 may extend November’s 5.7 percent advance. The Institute for Supply Management’s manufacturing index fell to 55 from October’s three-year high of 55.7, according to the median forecast of 72 economists surveyed by Bloomberg News. The report is due at 10 a.m. New York time. Default Concern Dubai’s announcement Nov. 25 that it would seek to delay debt repayments stoked concern that a potential default would set back the global financial system’s recovery from the recession. It triggered the biggest stock market slump in three months in Asia and Europe’s worst rout since April as the debt request risked adding to banks’ losses. Credit-default swaps protecting Dubai government debt fell 44.5 basis points to 525.5, after more than doubling last week, according to CMA DataVision prices. Contracts on state- controlled company DP World dropped 54 basis points to 589.5, CMA prices show. A decline signals an improvement in perceptions of credit quality. The extra yield investors demand to own emerging-market debt over U.S. treasuries fell 8 basis points, the most in three weeks, to 3.21 percentage points, according to JPMorgan Chase & Co.’s EMBI+ Index. The MSCI Emerging Markets Index of equities climbed 1.2 percent, while 17 of 19 major developing-nation currencies tracked by Bloomberg strengthened against the dollar. Treasuries Fall Treasuries led declines in government bonds, with the yield on the 10-year Treasury note rising 3 basis points to 3.23 percent, the first increase in six days. The yield on the German bund climbed 1 basis point to 3.16 percent. Copper led gains in industrial metals, advancing 1.6 percent to $7,040 a metric ton on the London Metal Exchange. Aluminum, nickel and zinc also rose. Gold futures jumped 1.5 percent to a record $1,200.50 an ounce in New York and silver added 1.4 percent to $18.7555 an ounce. Australia’s dollar rose, strengthening 1.3 percent versus the yen and 0.7 percent against the U.S. currency, as the nation’s central bank increased interest rates for an unprecedented third consecutive month, citing the pace of Asia’s economic recovery. To contact the reporter on this story: Michael Patterson in London at mpatterson10@bloomberg.net.

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