Dubai default threat rattles world stocks
MMR
Posts: 372
Dubai default threat rattles world stocks
Nov 26 09:14 AM US/Eastern
Global stock markets tumbled Thursday on mounting anxiety over a debt default request by Dubai and tighter lending conditions in China, analysts said.
London lost 1.86 percent to 5,264.97 points in late morning trade but was suspended at about 1030 GMT owing to a technical issue.
The London Stock Exchange said it was investigating the "root cause" of the problem and would update investors when it had further information.
Elsewhere, Frankfurt dived 1.80 percent to 5,698.99 points and Paris plunged 1.89 percent to 3,737.06 points at the half-way stage.
In Asia, Beijing nosedived 3.62 percent, Tokyo fell 0.62 percent and Hong Kong closed 1.78 percent lower. Chinese shares were also hit by the prospect of tighter banking rules and worries about monetary policy next year.
New York markets is closed Thursday for the Thanksgiving Day holiday in the United States.
"We have two major factors weighing on equities and other risk markets: Dubai's call for a moratorium on its debt repayment to May and more stringent capital adequacy requirements for Chinese banks -- but Dubai is bigger," David Morrison, an analyst at financial betting firm GFT, told AFP.
The government of Dubai shocked financial markets on Wednesday when it said it would ask creditors of its Dubai World conglomerate for a debt moratorium of at least six months.
The Dubai government announced that it would revamp the Dubai World group and wanted its lenders to extend its maturing debt until at least May 2010.
Dubai added that it had raised five billion dollars in a new bonds issue aimed at helping meet its debt obligations.
"Dollar weakness ... sent Asian markets plunging, which then took European exchanges with them," said Xavier de Villepion, an analyst with Global Equities in Paris.
In addition, the partial default by Dubai "fed a climate of insecurity and crisis of confidence at a time when fears are mounting about excessive public debt."
As equities sank heavily, investors sought safety in the bond market and gold, which struck yet another record high point.
"It's causing a mini flight-to-quality as US, European debt gets bought as a relative safe haven," noted Morrison.
He added: "If (Dubai) had given the debt markets more warning, then there would be less of a panic now."
Meanwhile, ratings agency Standard & Poor's said the development could be considered a default and downgraded a raft of Dubai government entities including Dubai World.
"The rating actions are the result of the announcement on November 25 of the restructuring of the debt obligations of Dubai World and its subsidiary, (construction group) Nakheel," S & P said in a statement.
"In our view, such a restructuring may be considered a default under our default criteria, and represents the failure of the Dubai government to provide timely financial support to a core government-related entity."
Barclays Capital analyst Paul Robinson warned that the issue of Dubai could contribute towards a "serious" pullback in global stock markets.
Others warned that it could take more than a decade for investor enthusiasm over Dubai to return, as a result of this week's development.
"Dubai could not undermine either itself, or global perception any further as a place not to do business in at the moment," MF Global analyst Manus Cranny told AFP.
"Quite literally, this geographic region is now looking as a mirage in stability terms."
He added: "It is the much longer term implications on funding, confidence and capital raising that will take a decade or more to re-establish.
"This last-minute moratorium on debt repayments at Dubai World is unacceptable has all the smacking of an Ireland -- nay worse, an Iceland -- in the making.
"The two regions may be polemic in climate but mirror images in terms of credit and ability to meet their bills."
Elsewhere on Thursday, gold soared to a record high of 1,195.13 dollars an ounce after a purchase of IMF gold by Sri Lanka's central bank, traders said.
The precious metal has also won support in recent weeks from inflationary fears, the weak US currency and increasing moves by central banks to diversify assets into gold. Link
Nov 26 09:14 AM US/Eastern
Global stock markets tumbled Thursday on mounting anxiety over a debt default request by Dubai and tighter lending conditions in China, analysts said.
London lost 1.86 percent to 5,264.97 points in late morning trade but was suspended at about 1030 GMT owing to a technical issue.
The London Stock Exchange said it was investigating the "root cause" of the problem and would update investors when it had further information.
Elsewhere, Frankfurt dived 1.80 percent to 5,698.99 points and Paris plunged 1.89 percent to 3,737.06 points at the half-way stage.
In Asia, Beijing nosedived 3.62 percent, Tokyo fell 0.62 percent and Hong Kong closed 1.78 percent lower. Chinese shares were also hit by the prospect of tighter banking rules and worries about monetary policy next year.
New York markets is closed Thursday for the Thanksgiving Day holiday in the United States.
"We have two major factors weighing on equities and other risk markets: Dubai's call for a moratorium on its debt repayment to May and more stringent capital adequacy requirements for Chinese banks -- but Dubai is bigger," David Morrison, an analyst at financial betting firm GFT, told AFP.
The government of Dubai shocked financial markets on Wednesday when it said it would ask creditors of its Dubai World conglomerate for a debt moratorium of at least six months.
The Dubai government announced that it would revamp the Dubai World group and wanted its lenders to extend its maturing debt until at least May 2010.
Dubai added that it had raised five billion dollars in a new bonds issue aimed at helping meet its debt obligations.
"Dollar weakness ... sent Asian markets plunging, which then took European exchanges with them," said Xavier de Villepion, an analyst with Global Equities in Paris.
In addition, the partial default by Dubai "fed a climate of insecurity and crisis of confidence at a time when fears are mounting about excessive public debt."
As equities sank heavily, investors sought safety in the bond market and gold, which struck yet another record high point.
"It's causing a mini flight-to-quality as US, European debt gets bought as a relative safe haven," noted Morrison.
He added: "If (Dubai) had given the debt markets more warning, then there would be less of a panic now."
Meanwhile, ratings agency Standard & Poor's said the development could be considered a default and downgraded a raft of Dubai government entities including Dubai World.
"The rating actions are the result of the announcement on November 25 of the restructuring of the debt obligations of Dubai World and its subsidiary, (construction group) Nakheel," S & P said in a statement.
"In our view, such a restructuring may be considered a default under our default criteria, and represents the failure of the Dubai government to provide timely financial support to a core government-related entity."
Barclays Capital analyst Paul Robinson warned that the issue of Dubai could contribute towards a "serious" pullback in global stock markets.
Others warned that it could take more than a decade for investor enthusiasm over Dubai to return, as a result of this week's development.
"Dubai could not undermine either itself, or global perception any further as a place not to do business in at the moment," MF Global analyst Manus Cranny told AFP.
"Quite literally, this geographic region is now looking as a mirage in stability terms."
He added: "It is the much longer term implications on funding, confidence and capital raising that will take a decade or more to re-establish.
"This last-minute moratorium on debt repayments at Dubai World is unacceptable has all the smacking of an Ireland -- nay worse, an Iceland -- in the making.
"The two regions may be polemic in climate but mirror images in terms of credit and ability to meet their bills."
Elsewhere on Thursday, gold soared to a record high of 1,195.13 dollars an ounce after a purchase of IMF gold by Sri Lanka's central bank, traders said.
The precious metal has also won support in recent weeks from inflationary fears, the weak US currency and increasing moves by central banks to diversify assets into gold. Link
0
Comments
I give away money. I collect money.
I don’t love money . I do love the Lord God.
Well..(pardon the pun) there are worst places from what I'm Told......hopefully they will wait until the end of the world in 2012...
roadrunner
MJ
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
You must be referring to the NFASB, i.e., the "No Financial Accounting Standards Board". I find it curious that while accounting is a rigid, staid, and boring profession that their leadership could make such a move without having a major outcry from the membership. I didn't hear anything at all from any of them, or at least it wasn't reported in any media if there was a protest. It's really a question of integrity.
The biggest problem with this sweeping things under the rug tendency is that for every "winner" there is a "loser". Sooner or later, the "losers" will figure out who they are and will demand accountability. Promises can only be broken a few times before the game ends. I think that we are almost there.
This is the part that I don't understand, "It's causing a mini flight-to-quality as US, European debt gets bought as a relative safe haven, noted Morrison....................As equities sank heavily, investors sought safety in the bond market and gold, which struck yet another record high point."
Why does US and European debt look good in comparison? Because the Fed and Treasury can play "hide the weenie" and nobody notices?
<<<I think that gold will be the ultimate winner here.>>>
I knew it would happen.
I don't see why this would affects anything.
<< <i>They got out of it by having the FASB allow marked to myth accounting once again. So Dubai simply needs to have their Accounting Standards revised to allow marked to myth accounting just like the US banks........problem solved.
You must be referring to the NFASB, i.e., the "No Financial Accounting Standards Board". I find it curious that while accounting is a rigid, staid, and boring profession that their leadership could make such a move without having a major outcry from the membership. I didn't hear anything at all from any of them, or at least it wasn't reported in any media if there was a protest. It's really a question of integrity.
The biggest problem with this sweeping things under the rug tendency is that for every "winner" there is a "loser". Sooner or later, the "losers" will figure out who they are and will demand accountability. Promises can only be broken a few times before the game ends. I think that we are almost there.
This is the part that I don't understand, "It's causing a mini flight-to-quality as US, European debt gets bought as a relative safe haven, noted Morrison....................As equities sank heavily, investors sought safety in the bond market and gold, which struck yet another record high point."
Why does US and European debt look good in comparison? Because the Fed and Treasury can play "hide the weenie" and nobody notices?
<<<I think that gold will be the ultimate winner here.>>> >>
Gold?
What is gold used for these days...jewelry?
I think other commodities and hard assets are a far better bet.
Just MHO.
Ray
<< <i>I always thought Dubai building those Islands was pretty stupid.
I don't see why this would affects anything. >>
50 billion here and 100 billion there just might start to add up to more than the trillions that have all ready been spent.
Believe it or not China just might be the next bubble, we could all be in the same boat earlier than you think .
<< <i>
I don't see why this would affects anything. >>
Gold is down to 1130 and oil down 5% right now because of the Dubai situation. Markets are going to be crazy tommorow.
Free Trial
<<<I think that gold will be the ultimate winner here.>>> >>
Gold?
What is gold used for these days...jewelry?
I think other commodities and hard assets are a far better bet.
Just MHO.
Ray >>
Gold is the ultimate currency and has no liabilities. Try that with paper. MJ
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
(x2,Meltdown),cajun,Swampboy,SeaEagleCoins,InYHWHWeTrust, bstat1020,Spooly,timrutnat,oilstates200, vpr, guitarwes,
mariner67, and Mikes coins
HaHaHahahahahahahahahahaha!!!!!
"“Those who sacrifice liberty for security/safety deserve neither.“(Benjamin Franklin)
"I only golf on days that end in 'Y'" (DE59)
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
<< <i>As a sidebar- This is EXACTLY why you do not trade on margin. Black Swans and mini swans do happen. MJ >>
There's nothing wrong with trading on margin as long as it is managed properly with stops and stop loss limits in place.
Just a thought - wasn't it Dubai who was setting up a gold depository at their airport, and weren't they having a bunch of gold shipped there just a few short weeks ago??
Lots of stuff going on. We just need to connect the dots.
Poor Erin. Gold is only down about $14.80 right now (from $33.00 down) and she makes comments like, "gold is down sharply".
Gold is down 1.25%, the stock market is down 1.3%. Hmmmmmmmm. No bias there!
I knew it would happen.
I would think government debt defaults would be a positive for gold rather than negative. Especially if the government perceived as defaulting were ours.
<< <i>
<< <i>As a sidebar- This is EXACTLY why you do not trade on margin. Black Swans and mini swans do happen. MJ >>
There's nothing wrong with trading on margin as long as it is managed properly with stops and stop loss limits in place. >>
I'm thinking stop losses are exactly what caused most of this dip in the middle of the night. Dubai caused some strength in the dollar and maybe some gold selling. In the thin trading on a holiday evening in the US, gold moved far enough to trigger a large stop loss. This would not have moved gold much in normal trading but on a very thin evening, the stop loss moved gold down another $8 triggering another one. You can see what looks like large, probably computer generated sell orders hitting time after time on the way down last night.
Now the sellers woke up this morning, saw what the computers did, and are buying back their PMs.
---Jerry
<< <i>The world default began with the major US banks in 2007. They got out of it by having the FASB allow marked to myth accounting once again. So Dubai simply needs to have their Accounting Standards revised to allow marked to myth accounting just like the US banks........problem solved. Prosperity and growth will be back in vogue. The US banks, insurers, and GSE's already showed that being insolvent is no obstacle to "making money" (lol)....why the big fuss over Dubai.....as if this is something new?
>>
Just value their oil at $200 a barrel and they'll be back in the pink.
The beauty of it is if the economy recovers oil really will be $200.
<< <i>
<< <i>As a sidebar- This is EXACTLY why you do not trade on margin. Black Swans and mini swans do happen. MJ >>
There's nothing wrong with trading on margin as long as it is managed properly with stops and stop loss limits in place. >>
I respectfully disagree. Gap downs happen and stops won't help you there if they blow right past them. It can also lead to bad decisions. MJ
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
I'm still so glad I kept buying gold instead of buying real estate in Dubai.
Hopefully someone remembers to revisit this thread in a few years to see how Dubai real estate is doing.
Probably not much better then the US.Dubai
That article was 2010. I wonder how it's doing today ?
<< <i>I'm still so glad I kept buying gold instead of buying real estate in Dubai.
Hopefully someone remembers to revisit this thread in a few years to see how Dubai real estate is doing.
Probably not much better then the US.Dubai
That article was 2010. I wonder how it's doing today ?[/
Dubai, July 2:
Prices of apartments and villas have gone up by up to 9 per cent and 16 per cent respectively here during the first half of this year, indicating that the real estate market is on the way to recovery after three years of decline.
Link