London: World markets mostly rose on Monday after Dubai said it had received $10 billion in emergency funds from its oil—rich neighbour Abu Dhabi, helping to ease investor fears that the emirate will default on its debt.
In Europe, the FTSE 100 index of leading British shares was up 51.17 points, or 1 percent, at 5,312.74 while Germany’s DAX rose 55.68 points, or 1 percent, to 5,811.97. The CAC—40 in France was 27.54 points, or 0.7 percent, higher at 3,831.26.
The Dubai government said the financing would help pay off $4.1 billion in debts owed by struggling Dubai World’s property division and due on Monday. The rest would go toward bills and expenses through April.
The news cheered investors, who had feared the consequences of Dubai World defaulting. Since the state—owned company announced its intention last month to delay payment on its $60 billion in debts, investors have braced for more financial turmoil and been forced to re-evaluate their assumptions about government promises to make good on debts.
“The Dubai news is a big surprise to the market,” said Dariusz Kowalczyk, chief investment strategist for SJS Markets in Hong Kong. “We were preparing for a lack of payment today and now they’re saying they will pay. This is definitely positive for investor confidence.”
Earlier in Asia, most stock markets rose with the notable exception of Japan’s Nikkei, which closed down 2.19 points at 10,105.68 as investor optimism was weighed down by a fairly sluggish Tankan business confidence survey - it showed only a modest fourth quarter improvement and a continued reluctance by firms to ramp up their investments.
However, Hong Kong’s Hang Seng rose 183.64 points, or 0.8 percent, to 22,085.75 and South Korea’s Kospi added 7.87 points, or 0.5 percent, to 1,664.77. Elsewhere, Australia’s benchmark added 0.4 percent, China’s Shanghai’s index was up 1.7 percent and Taiwan’s market gained 0.3 percent.
The advance is expected to continue when Wall Street opens - Dow futures were up 42 points, or 0.4 percent, at 10,465 while the broader Standard & Poor’s 500 futures rose 5.2 points, or 0.5 percent, at 1,108.50.
On Friday, U.S. stocks closed higher after solid retail sales data helped reinforce hopes that the world’s largest economy was recovering solidly from recession.
However, investors are fully aware that the gains could well peter out as this is the last full trading week of 2009 and investors may use the opportunity to bolster their portfolios by locking in gains made over the last nine months.
“With the final full week of trading for the year now underway, concerns may also start to build over the risk of traders getting jittery after the massive run of gains we’ve seen since March, potentially attracting some to start booking profits,” said Cameron Peacock, market analyst at IG Markets in Melbourne, Australia.
Oil prices fell again, with benchmark crude for January delivery down 24 cents at $69.63 a barrel, while gold rose 0.5 percent to $1,1250 an ounce.
Meanwhile, the dollar fell 0.5 percent to 88.50 yen while the euro rose 0.2 percent to $1.4649.