Stocks Rally, Euro Gains as Merkel Backs Greek Aid; Dubai Debt Risk Slumps
Stocks Rally, Dubai Swaps Plunge as Officials Ease Debt Concern
March 25 (Bloomberg) -- Stocks rallied and the euro snapped a two-day decline against the dollar as Germany backed a Greek rescue proposal. The cost to protect Dubai’s debt against a default plunged after the emirate committed $9.5 billion to Dubai World’s restructuring.
The DFM General Index of Dubai shares jumped 4.3 percent and credit default swaps linked to the emirate’s debt fell 53.8 basis points to 368.9 basis points at 10:50 a.m. in London. Both were the biggest moves since Dec. 15. The Stoxx Europe 600 Index advanced 0.5 percent and futures on the Standard & Poor’s 500 Index gained 0.3 percent. The euro strengthened as much as 0.3 percent against the dollar, rebounding from a 10-month low.
Chancellor Angela Merkel said she’ll recommend to European leaders meeting in Brussels today that Greece be pledged International Monetary Fund assistance and bilateral aid to tackle the region’s biggest deficit. In Dubai, the government promised to support the state-owned holding company, easing concern of a default four months after plans to delay debt payments roiled world markets.
“Governments are moving toward solutions to stop wholesale collapse in the short term,” said Mark Schofield, head of fixed-income strategy at Citigroup Global Markets Ltd. in London. “There’s a structural desire to stabilize the fiscal environment.”
Abu Dhabi Gains
Abu Dhabi’s ADX General Index gained 1.3 percent and Poland’s WIG20 Index advanced 1.2 percent. Dubai five-year credit-default swaps are trading at the lowest level since November, according to prices from CMA DataVision and Bloomberg.
Europe’s Stoxx 600 rose to the highest level in 18 months. Hochtief AG, Germany’s biggest construction company, gained 3.9 percent in Frankfurt after posting earnings that beat analysts’ estimates. Next Plc, the U.K.’s second-biggest clothing retailer, surged 5.2 percent in London after boosting its dividend and reporting better-than-estimated profit.
The MSCI World Index advanced 0.1 percent and the MSCI Asia Pacific Index slipped less than 0.1 percent. Li & Fung, a trading company that supplies Wal-Mart Stores Inc., slumped 9.9 percent, while Unicom, China’s No. 2 mobile-phone company, sank 4.1 percent in Hong Kong.
U.S. futures gained after the S&P 500 yesterday dropped 0.6 percent. Fewer Americans filed first-time claims for jobless benefits last week, economists said before a Labor Department report due at 8:30 a.m. in Washington.
Euro Appreciates
The euro strengthened versus the dollar for the first time in three days, reaching $1.3339 after $1.3284. European Central Bank President Jean-Claude Trichet said the bank will extend its emergency collateral rules beyond 2010, softening his stance as Greece struggles to cut a budget deficit that is 12.9 percent of gross domestic product.
European Union leaders are meeting in Brussels as Germany tries to end haggling over an aid package for Greece, whose budget deficit is more than four times the EU’s limit. Greek bonds rose, with the two-year note yield dropping 18 basis points to 4.98 percent.
The $750 million Islamic bond, or sukuk, of Nakheel PJSC, a Dubai World unit, surged 27 cents 91.5 cents on the dollar. The emirate’s government said in a statement it will supply Dubai World with $1.5 billion and convert $8.9 billion in debt to equity. Nakheel will receive $8 billion in funding and $1.2 billion through a debt swap. Nakheel’s bank creditors will be asked to restructure loans to the company at commercial rates.
‘Very Generous’
Dubai’s announcement “surpasses my expectations, it’s very generous,” said Daniel Broby, chief investment officer at SilkInvest Ltd., a London-based investment firm that holds bonds of the Dubai World unit Nakheel PJSC. “This is what it takes to get the U.A.E. and Dubai back on its feet again.”
Concern that the fallout from the global financial crisis may leave some countries unable to pay their debts was reignited after Dubai World said Dec. 1 it wanted to restructure $26 billion of securities.
Treasuries advanced, paring a decline yesterday that sent the 10-year yield to the highest level since January as demand at an auction from a group of investors that includes foreign banks fell to the lowest level in eight months. The yield slipped 3 basis points today to 3.83 percent. The 10-year U.S. swap spread was minus 9.2 basis points today. It turned negative for the first time on record three days ago.
Crude oil for May delivery was little changed at $80.78 a barrel, 17 cents up, on the New York Mercantile Exchange.
To contact the reporters on this story: Gavin Serkin at
gserkin@bloomberg.net Last Updated: March 25, 2010 06:57 EDT
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