A strong run for mining stocks helped the FTSE 100 Index push above the 5950 mark for the first time since June 2008.

The London market closed 60.2 points up at 5951.8 – despite a warning from key agency Moody’s that it may lower Portugal’s credit rating. The blow comes just days after a similar move by the credit ratings agency on Spain.

The pound fell against the dollar at 1.54 and was down against the euro at 1.17 after UK public finance figures came in much worse than expected at £23.3 billion in November – a monthly record – but higher metal and oil prices boosted commodity stocks, while banking giants also made decent gains following a poor run sparked by fears of European debt contagion.

Royal Bank of Scotland finished at the top of the risers’ board, up more than 4% or 1.7p to 40.2p, while Barclays added 7.4p to 268.4p. Lloyds, which spooked investors on Friday after it highlighted the impact of Ireland’s mounting debt crisis on its books, also made headway, up 1.6p to 68.5p.

Miners likewise dominated the risers’ board, with Anglo American up 131p to 3272.5p, Xstrata up 51p to 1506p and Eurasian Natural Resources ahead 31.5p to 1031p.

Rolls-Royce saw shares gained 13p to 650p after the European Aviation Safety Agency said it was set to relax tight inspection rules imposed on its Trent 900 engines. The rules were set last month after a Trent 900 on a Qantas A380 superjumbo blew apart on take-off from Singapore.

But thin trading volumes in the lead up to the Christmas holidays were also thought to be behind volatility.

The surge came despite news of more woes in the retail sector after small cap stock Alexon, the owner of Ann Harvey, Dash and Kaliko brands, issued a profits warning following snow-hit sales. Alexon’s shares plummeted 18% or 2.8p to 12.3p after it reported a 20% plunge in sales over the past few weeks.

The figures confirmed the problems experienced by retailers across the country as snow and ice keeps shoppers away from stores in what should be the busiest week of the year.

The biggest Footsie risers were Royal Bank of Scotland up 1.8p at 40.2p, Anglo American ahead 131p at 3272.5p, Carnival up 104p at 2905p and Xstrata ahead 51p at 1506p. The biggest Footsie fallers were Aggreko down 46p at 1524p, Randgold Resources off 110p at 5490p, Cairn Energy down 5.3p at 415p and BG Group off 14.5p at 1317p.

Talks to rein in bankers’ pay are set to continue over Christmas after bank bosses met George Osborne and Vince Cable to hammer out a deal, the Government has said.

The heads of Britain’s five biggest banks – including Barclays and part-nationalised players Royal Bank of Scotland and Lloyds Banking Group – were called in to see the Chancellor and Business Secretary earlier on Tuesday as they look to reach an agreement limiting excessive City handouts in the forthcoming bonus round and to boost lending to businesses.

The Government said talks – postponed on Monday for a day after Mr Osborne’s flight from the US was delayed due to the snow chaos – were “constructive”, but ongoing.

A spokesman said: “The banks have put a number of proposals on the table.

“The Government affirmed its desire to see a strong, responsibly and internationally competitive financial sector. The dialogue was constructive.

“These proposals will be the subject of further discussions over the Christmas period with the aim of building a sustainable, co-operative relationship between the lenders and Government in 2011 in support of the economic recovery.”

Banks and government have been locked in talks for some weeks over the issue of pay and lending, with concerns they will not meet original aims to have a deal agreed by the year end.

Mr Osborne and Mr Cable want to avoid a lavish bank bonus season at a time when the country is undergoing painful spending cuts following the recession, brought on by the banking crisis.

They also want to see the sector support the UK recovery through increased lending to small businesses.

It is thought the banks may agree to pledge £200 billion in lending to small businesses. But the banks are also said to want clarification on what the Government defines as an unacceptable bonus.

Business Secretary Vince Cable has said he has “declared war” on the media tycoon Rupert Murdoch.

The BBC said it obtained an unpublished section of Mr Cable’s interview with two undercover reporters from The Daily Telegraph, describing how he was seeking to block Mr Murdoch’s bid to take a majority stake in BSkyB.

Mr Cable is heard saying: “I have declared war on Mr Murdoch, I think I’ll win. I didn’t politicise it because it is a legal situation.

“He is trying to take over BSkyB. He has a minority shareholding and he wants a majority – and majority control would give them a massive stake. I have blocked it using the powers that I have. For people who know what is happening, this is a big, big thing.”

According to the BBC, Mr Cable goes on to say: “His (Mr Murdoch’s) whole empire is now under attack. So there are things like that we do in government, that we can’t do… all we can do in opposition is protest.”

The disclosure of Mr Cable’s private views on Mr Murdoch will raise questions over whether he can properly carry out his statutory role as the final arbiter of whether the takeover of BSkyB should go ahead.

A spokesperson for Mr Murdoch’s News Corp said: “News Corp is shocked and dismayed by reports of Mr Cable’s comments. They raise serious questions about fairness and due process.”

Details of Mr Cable’s additional comments emerged after David Cameron and Nick Clegg used a joint No 10 press conference to play down his earlier remarks suggesting that he could quit the coalition if he was “pushed too far” by the Tories and claiming that the situation with the coalition was “like fighting a war”.

Asked about Mr Cable’s comments at the press briefing – which occurred before the comments about Mr Murdoch emerged – both Mr Clegg and Mr Cameron said he was “right to be embarrassed”, and they insisted any differences between the coalition parties are “thrashed out in private and then you come to a common solution”.

More than 300 people are in intensive care with flu, Government figures have shown.

Data from the Department of Health for England revealed there were 302 people in intensive care beds. It is unclear how many have swine flu but they are expected to be in the majority.

New figures on the number of deaths from flu and swine flu will be released by the Health Protection Agency on Thursday.

Health Secretary Andrew Lansley briefed Cabinet colleagues on Tuesday morning on the flu situation and told them the NHS had plenty of capacity to deal with the upsurge in cases.

Prime Minister David Cameron told a press conference at 10 Downing Street: “We had a report at Cabinet this morning from the Health Secretary about the situation as regards flu, and particularly swine flu.

“He gave a report about the number of critical care beds being used for people with flu. While obviously the number of flu cases has doubled in the last week, there is still plenty of capacity in the NHS.

“I think the figures on flu are are quite similar to two years ago. They are a little worse than last year. I think there is a very good grip in the Department of Health on this issue. Andrew Lansley has a great grip over that department.”

Mr Cameron said he did not know whether his wife Samantha had been advised of the risk of swine flu to pregnant women while she was carrying their fourth child, Florence, who was born earlier this year.

As of Monday, there were 24 children under five in critical care with confirmed or suspected flu, another 12 aged five to 15, and 243 in the 16 to 64 age group. There were also 23 people aged over 65 in critical care.

So far this flu season, 14 people have died with confirmed swine flu and another three from flu type B. Of those who died, all were aged under 65, with six aged under 18.

The Queen’s granddaughter Zara Phillips has said she was left “shocked” but “very happy” when her long-term boyfriend and England rugby player Mike Tindall proposed.

Tindall popped the question to his 29-year-old partner on Monday night at their Gloucestershire home, and said he was “delighted” she had agreed to marry him.

The couple met in a Sydney bar during the 2003 Rugby World Cup through Zara’s cousin Prince Harry. Their friendship blossomed into a romance and Tindall, 32, has claimed that it was his “pure charm” that won the royal’s heart.

In a short statement issued by a sports marketing company that represents the couple, Zara said: “I was really shocked when Mike proposed but I am very happy.”

Tindall was also ecstatic about their news and said: “I am delighted that Zara has agreed to marry me. We are both very excited about the next stage of our lives together.”

A Palace spokeswoman said: “The Queen and the Duke of Edinburgh are delighted with the news. They got engaged… at the couple’s home in Gloucestershire and a date has yet to be set.”

The Queen’s granddaughter is one of Britain’s top equestrians and a former world three-day eventing champion. Her husband-to-be, who plays for club side Gloucester, has been capped 66 times by his country and was part of the England team that won the 2003 Rugby World Cup.

The news that Zara is to wed her boyfriend comes soon after the engagement of Prince William and Kate Middleton last month. Zara and Tindall have not yet set a date but it seems likely they will tie the knot in 2011 – setting up the prospect of two royal weddings next year.

The couple could opt for St George’s Chapel at Windsor Castle for their wedding – the venue chosen by Zara’s brother Peter when he married his wife Autumn in 2008.

A Buckingham Palace statement said: “The Princess Royal and Captain Mark Phillips are pleased to announce the engagement of their daughter Zara Phillips to Mr Mike Tindall, son of Mr Phillip and Mrs Linda Tindall.”

A suspicious package full of wires and powder has been found in a subway car in Rome, but the city’s mayor said the device could not have exploded.

The device was found at around 10am local time on Tuesday (9am GMT) inside a train at the Rebibbia station, on the outskirts of Italian capital. The train was at the end of the line and empty when the package was found, said Atac, which runs the Rome subway.

Bomb-disposal experts checked the powder and concluded “the device could not have exploded”, said Rome Mayor Gianni Alemanno.

“The rudimentary device could not trigger an explosion,” Mr Alemanno was quoted as saying by the ANSA news agency.

Atac said in a statement the train was in an area beyond the platform that is used for manoeuvring when the device was found.

Spokeswoman Diana Formaggio said the package contained powder and wires. She said the station was never closed and the service was never interrupted.

A judge has criticised a settlement agreement between the Serious Fraud Office (SFO) and defence giant BAE Systems as he fined the company £500,000.

The penalty was given to the firm for failing to keep proper records of payments to an adviser in Tanzania and followed a controversial plea bargain at the end of six years of investigations by the SFO.

It was announced in February that a deal had been struck between prosecutors and the company, provoking anger by those who wanted it held to account in court over bribery allegations.

Under the deal, BAE was to pay 400 million US dollars (£260 million) to America’s Department of Justice and plead guilty to one charge of conspiring to make false statements to the US government relating to its operations and business dealings in the Czech Republic, Hungary and Saudi Arabia.

It would also pay £30 million in the UK for failing to keep “reasonably accurate” accounting records over activities in Tanzania – the SFO’s largest settlement with a UK company.

Southwark Crown Court heard that payments totalling about 12.4 million US dollars (£7.7 million) were made to two companies controlled by Tanzania-based businessman Shailesh Vithlani between January 2000 and December 2005.

The court heard BAE believed Mr Vithlani was probably given the money for helping it to win a 40 million dollar (£25.8 million) contract to provide a radar system for Dar-es-Salaam international airport in Tanzania.

BAE pleaded guilty to one count of breaching its duty to keep accounting records, contrary to section 221 of the Companies Act 1985.

Judge Mr Justice Bean criticised the settlement agreement, saying it was “loosely and perhaps hastily drafted”. He highlighted paragraph eight, whereby the SFO agreed on “no further investigation or prosecutions of any member of the BAE Systems Group for any conduct preceding 5 February 2010”.

The judge said: “But I am surprised to find a prosecutor granting a blanket indemnity for all offences committed in the past, whether disclosed or otherwise.”

New figures have heaped more pressure on the Government’s borrowing targets after Britain slumped into the red by a record £23.3 billion in November.

Health and defence spending and higher European Union payouts ensured the monthly figure – excluding financial interventions by the Government – beat the £17.4 billion borrowed a year earlier by a margin of £5.9 billion.

Some economists warned the coalition is now in danger of exceeding the annual target set by the tax and spending watchdog, while the Treasury said the figures reinforced the need for its belt-tightening austerity measures.

Chancellor George Osborne is likely to seize on the bigger-than-expected figures as proof of the need for his £81 billion package of spending cuts and planned hike in VAT early next year.

The latest figures from the Office for National Statistics (ONS) stunned the City as analysts were braced for a figure in the region of £17 billion.

Total public borrowing for the year to date now stands at £104.4 billion, the ONS said, creeping closer to the Government’s target of £148.5 billion for the financial year to March 31, which is based on the Office for Budget Responsibility’s recently downgraded forecast.

It also brought net debt to £863.1 billion, which represents 58% of gross domestic product – another monthly record.

Jonathan Loynes, chief economist at Capital Economics, said based on November’s figures, borrowing is likely to total about £155 billion in the fiscal year 2010-11 as a whole, some £7 billion above the OBR’s latest forecast.

He said: “Given that the economy has expanded rather more quickly than the OBR anticipated over recent quarters, current borrowing might have been expected to come in rather lower.”

He added: “Overall, there is nothing here to weaken the Government’s determination to see through its austerity programme. But we continue to doubt that the economy will weather the coming fiscal storm as well as it hopes.”