Dubai debt fallout remains focus in world markets; all eyes on Wall Street open

Dubai debt fallout remains focus in world markets

LONDON — European stock markets fell modestly Monday amid concerns about Dubai’s debt problems, even though the United Arab Emirates’ central bank pledged to stand behind local and foreign banks.

Investors in Europe, however, continued to worry about the fallout from Dubai World’s announcement last week that it wanted to postpone forthcoming debt payments until May. A part of the $60 billion debts held by the government investment company is thought to be with European banks, particularly those in Britain.

“Anxiety has remained obvious in Europe,” said Jane Foley, research director at Forex.com.

In Europe, the FTSE 100 index of leading British shares was down 24.52 points, or 0.5 percent, at 5,221.21 while Germany’s DAX fell 35.74 points, or 0.6 percent, to 5,649.87. The CAC-40 in France was 20.50 points, or 0.6 percent, lower at 3,700.95.

Earlier, Asian markets rebounded by around 3 percent after tumbling heavily on Friday, when European and U.S. stock markets had regained their poise.

The worry is that Dubai’s problems may be a harbinger of things to come, even though the announcement from the UAE central bank may minimize the risk of contagion.

“It is a warning sign that sovereign credit risks are likely to remain a problem — Ireland, Greece and Britain, for example — and the deterioration in budget deficits and debt/GDP ratios will remain a key feature for some time,” said Neil Mackinnon, global strategist at VTB Capital.

All eyes will be on Wall Street when it opens shortly, as many U.S. investors were out of the office for Thanksgiving celebrations when the Dubai news broke.

At the moment, U.S. stocks are poised for a steady opening — Dow futures were up 18 points, or 0.2 percent, at 10,310 while the broader Standard & Poor’s 500 futures fell 2.8 points, or 0.3 percent, to 1,092.30.

“We are likely to see a lack of direction ahead of the US open and a steady session on Wall Street should ensure that markets return to normality for the rest of the week,” said Tim Hughes, head of sales trading at IG Index.

If, and when, the Dubai concerns diminish, investors have a raft of economic news this week to digest, which could well be crucial in how markets end the year.

Friday’s U.S. nonfarm payrolls report for November will be key — the data often sets the tone in markets for a week or two. However, there are other important U.S. releases due, including the Institute for Supply Management’s surveys into the services and manufacturing sectors.

If investors conclude that the U.S. economy is losing some steam, then that could well pave the way for an end of year bout of profit-taking following an eight-month bull run.

Earlier in Asia, nearly every market traded higher, with Japan’s Nikkei 225 stock average climbing 264.03 points, or 2.9 percent, to 9,345.55. Hong Kong’s Hang Seng added 687.00 points, or 3.3 percent, to 21,821.50 and South Korea’s Kospi added 2 percent to 1,555.60. Both those markets tumbled nearly 5 percent on Friday.

Elsewhere, Shanghai’s market climbed 3.2 percent, Australia’s index was 2.8 percent higher and Taiwan’s benchmark rose 1.2 percent.

Stocks in the UAE ended sharply lower though, with Abu Dhabi’s main index down 8 percent and Dubai’s closing more than 7 percent lower.

Elsewhere, oil prices steadied, with benchmark crude up 10 cents at $76.15 a barrel, but gold lost 0.2 percent of its value to trade at $1,172.10 an ounce.

The dollar fell 0.1 percent to 86.60 yen, while the euro rose 0.1 percent to $1.5030.

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AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.