Nov. 27 (Bloomberg) -- Stocks and commodities dropped, Treasuries jumped and credit default swaps climbed after Dubai’s attempt to reschedule its debt rattled investors. The dollar briefly fell below 85 yen, a 14-year low, prompting speculation Japan will intervene.
The MSCI Asia Pacific Index slid 3.3 percent to 113.74 as of 5:02 p.m. in Tokyo, the biggest drop since Aug. 17. The Dow Jones Stoxx 600 Index of European shares declined 1.4 percent and Standard & Poor’s 500 Index futures plunged 3.38 percent. Ten-year Treasury yields fell 10 basis points. The yen gained as much as 2 percent against the dollar. Both currencies rallied against the Australian dollar, the South Korean won and the Russian ruble as investors shunned higher-yielding assets.
Dubai World, the government investment company burdened by $59 billion of liabilities, sought to delay repayment on much of its debt. The yen pared its advance after Japan’s Finance Minister Hirohisa Fujii said he may contact the U.S. and Europe to act on currencies, signaling his growing concern that the yen’s ascent will hurt the economy.
“If Dubai has to default, that could start a wave of defaults in other areas,” Mark Mobius, the chairman of Templeton Asset Management Ltd. who oversees $25 billion in emerging-market assets, said in an interview on Bloomberg Television from Hanoi. “This may be the trigger to allow for the market to take a rest and pull back.”
Banks were the biggest decliners. HSBC Holdings Plc, Europe’s largest lender, tumbled 7.6 percent to HK$87, while Standard Chartered Plc sank 7.5 percent to HK$187.70. Goldman Sachs analysts led by Roy Ramos estimated potential credit losses at HSBC will be $611 million, and $177 million for Standard Chartered, according to a research report today.
Exporters Slump
Makers of electronics and cars fell in Japan as the yen’s gain threatened to erode overseas earnings. Sony Corp., which makes the PlayStation 3 game machine, dropped 4.4 percent to 2,265 yen. Honda Motor Co., a carmaker that gets 47 percent of its sales in North America, lost 3.8 percent to 2,660 yen.
The MSCI World Index sank 0.6 percent today after yesterday’s 1.4 percent drop. The Morgan Stanley Emerging Markets Index, which has gained 65 percent this year, fell 2.6 percent, adding to a 2.1 percent decline yesterday. Hong Kong’s Hang Seng Index and South Korean Kospi slumped 5 percent. U.S. markets were closed yesterday for Thanksgiving. Markets in Muslim nations including the United Arab Emirates and Turkey are shut today for a public holiday.
Dubai, which borrowed $80 billion in a four-year construction boom to transform its economy into a regional tourism and financial hub, suffered the world’s steepest property slump in the worst global recession since World War II. Home prices fell 50 percent from their 2008 peak, according to Deutsche Bank AG.
‘Contagion Effect’
“People are worried about the contagion effect,” said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors, which holds $75 billion in assets. “Events like this bring back all the bad memories from the global financial crisis.”
Building companies fell on concern they may lose revenue from Dubai. Obayashi Corp. dropped 8.7 percent to 284 yen, while Kajima Corp., Japan’s biggest listed construction company, slid 14 percent to 162 yen. The companies may lose “tens of billions of yen,” Hiroki Kawashima, an analyst at Daiwa Securities Group Inc., wrote in a report.
The MSCI Asia Pacific Index has climbed 62 percent from a more than five-year low on March 9 amid signs stimulus measures were reviving economies following the worst financial crisis since the Great Depression. Writedowns and losses stemming from the crisis have risen to more than $1.7 trillion since 2007, according to Bloomberg data.
Intervention Risk
Japan’s Fujii said Group of Seven nations “will do what is necessary.” Financial Services Minister Shizuka Kamei urged an international response to halt the currency’s gain.
“People are scared and concerned about possible intervention,” said Yasutoshi Nagai, chief economist at Daiwa Securities SMBC Co. in Tokyo. The Bank of Japan may sell the yen “and buy Treasuries, which will be a plus for Treasuries.”
Treasuries rose the most in almost two weeks and the yield on the benchmark 10-year note touched 3.18 percent, the lowest since Oct. 8. Yields on five-year Japanese government bonds sank to the lowest since 2005, while yields on 10-year Australian government bonds lost eight basis points.
Dollar, Yen
The yen and the dollar rose against all of the rest of the 17 most-active currencies as investors exited high-yielding assets. The dollar rose 0.7 percent to $1.4921 per euro. The Australian dollar fell 1 percent to 90.46 U.S. cents, the Russian ruble dropped 2.7 percent to 29.73 per dollar and the Korean won declined 1.2 percent to 1,169 per dollar.
“Dubai has prompted a wave of risk aversion globally,” said Mitul Kotecha, head of global foreign-exchange strategy at Calyon in Hong Kong. “This might prompt a short sell-off in the won but I think that’s what it will be. It’s not going to be a huge fallout because Asia looks more solid in terms of fundamentals.”
Crude oil slumped as much as 5.2 percent to $73.90 a barrel in New York trading, the lowest compared with intraday prices since Oct. 13.
Copper led a plunge in industrial metals, dropping 2.4 percent to $6,658 a metric ton on the London Metal
The MSCI Asia Pacific Index slid 3.3 percent to 113.74 as of 5:02 p.m. in Tokyo, the biggest drop since Aug. 17. The Dow Jones Stoxx 600 Index of European shares declined 1.4 percent and Standard & Poor’s 500 Index futures plunged 3.38 percent. Ten-year Treasury yields fell 10 basis points. The yen gained as much as 2 percent against the dollar. Both currencies rallied against the Australian dollar, the South Korean won and the Russian ruble as investors shunned higher-yielding assets.
Dubai World, the government investment company burdened by $59 billion of liabilities, sought to delay repayment on much of its debt. The yen pared its advance after Japan’s Finance Minister Hirohisa Fujii said he may contact the U.S. and Europe to act on currencies, signaling his growing concern that the yen’s ascent will hurt the economy.
“If Dubai has to default, that could start a wave of defaults in other areas,” Mark Mobius, the chairman of Templeton Asset Management Ltd. who oversees $25 billion in emerging-market assets, said in an interview on Bloomberg Television from Hanoi. “This may be the trigger to allow for the market to take a rest and pull back.”
Banks were the biggest decliners. HSBC Holdings Plc, Europe’s largest lender, tumbled 7.6 percent to HK$87, while Standard Chartered Plc sank 7.5 percent to HK$187.70. Goldman Sachs analysts led by Roy Ramos estimated potential credit losses at HSBC will be $611 million, and $177 million for Standard Chartered, according to a research report today.
Exporters Slump
Makers of electronics and cars fell in Japan as the yen’s gain threatened to erode overseas earnings. Sony Corp., which makes the PlayStation 3 game machine, dropped 4.4 percent to 2,265 yen. Honda Motor Co., a carmaker that gets 47 percent of its sales in North America, lost 3.8 percent to 2,660 yen.
The MSCI World Index sank 0.6 percent today after yesterday’s 1.4 percent drop. The Morgan Stanley Emerging Markets Index, which has gained 65 percent this year, fell 2.6 percent, adding to a 2.1 percent decline yesterday. Hong Kong’s Hang Seng Index and South Korean Kospi slumped 5 percent. U.S. markets were closed yesterday for Thanksgiving. Markets in Muslim nations including the United Arab Emirates and Turkey are shut today for a public holiday.
Dubai, which borrowed $80 billion in a four-year construction boom to transform its economy into a regional tourism and financial hub, suffered the world’s steepest property slump in the worst global recession since World War II. Home prices fell 50 percent from their 2008 peak, according to Deutsche Bank AG.
‘Contagion Effect’
“People are worried about the contagion effect,” said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors, which holds $75 billion in assets. “Events like this bring back all the bad memories from the global financial crisis.”
Building companies fell on concern they may lose revenue from Dubai. Obayashi Corp. dropped 8.7 percent to 284 yen, while Kajima Corp., Japan’s biggest listed construction company, slid 14 percent to 162 yen. The companies may lose “tens of billions of yen,” Hiroki Kawashima, an analyst at Daiwa Securities Group Inc., wrote in a report.
The MSCI Asia Pacific Index has climbed 62 percent from a more than five-year low on March 9 amid signs stimulus measures were reviving economies following the worst financial crisis since the Great Depression. Writedowns and losses stemming from the crisis have risen to more than $1.7 trillion since 2007, according to Bloomberg data.
Intervention Risk
Japan’s Fujii said Group of Seven nations “will do what is necessary.” Financial Services Minister Shizuka Kamei urged an international response to halt the currency’s gain.
“People are scared and concerned about possible intervention,” said Yasutoshi Nagai, chief economist at Daiwa Securities SMBC Co. in Tokyo. The Bank of Japan may sell the yen “and buy Treasuries, which will be a plus for Treasuries.”
Treasuries rose the most in almost two weeks and the yield on the benchmark 10-year note touched 3.18 percent, the lowest since Oct. 8. Yields on five-year Japanese government bonds sank to the lowest since 2005, while yields on 10-year Australian government bonds lost eight basis points.
Dollar, Yen
The yen and the dollar rose against all of the rest of the 17 most-active currencies as investors exited high-yielding assets. The dollar rose 0.7 percent to $1.4921 per euro. The Australian dollar fell 1 percent to 90.46 U.S. cents, the Russian ruble dropped 2.7 percent to 29.73 per dollar and the Korean won declined 1.2 percent to 1,169 per dollar.
“Dubai has prompted a wave of risk aversion globally,” said Mitul Kotecha, head of global foreign-exchange strategy at Calyon in Hong Kong. “This might prompt a short sell-off in the won but I think that’s what it will be. It’s not going to be a huge fallout because Asia looks more solid in terms of fundamentals.”
Crude oil slumped as much as 5.2 percent to $73.90 a barrel in New York trading, the lowest compared with intraday prices since Oct. 13.
Copper led a plunge in industrial metals, dropping 2.4 percent to $6,658 a metric ton on the London Metal
Ba dorood:
This proves that Sheikh has more money than brain.
They simply could invest in existing resorts around the world to have revenue for their country once oil well is dried up but since they are TAAZY and it is not just making money that they are after but to FORCE THEIR WAY OF LIFE ON THE REST OF THE WORLD!!
Nobody in their right mind would leave resorts in Europe by Mediterranean Sea or islands in Caribbean Sea or in Pacific ocean and go to the HELL HOLE of Dubai!!!
Late Shah trued to get Kish as one of the resorts for tourism but weather does not allow it.
The 75-80 degrees F will always win over 120 degrees F!!! Simple but again, it is not money that TAAZI are after but to force their culture and religion onto the world.
This proves that Sheikh has more money than brain.
They simply could invest in existing resorts around the world to have revenue for their country once oil well is dried up but since they are TAAZY and it is not just making money that they are after but to FORCE THEIR WAY OF LIFE ON THE REST OF THE WORLD!!
Nobody in their right mind would leave resorts in Europe by Mediterranean Sea or islands in Caribbean Sea or in Pacific ocean and go to the HELL HOLE of Dubai!!!
Late Shah trued to get Kish as one of the resorts for tourism but weather does not allow it.
The 75-80 degrees F will always win over 120 degrees F!!! Simple but again, it is not money that TAAZI are after but to force their culture and religion onto the world.
Dubai Government will not hurt a bit over this fiasco. It's the world's banks and ultimately the poor tax-payers in North America and Europe that will pay for it.
Dubai is only a single Emirate in UAE and may get bailed out by the Abu Dhabi friends or may not. What is going to hurt the most is the North American and European banks who lent money to government owned coporations in Dubai. They will be crying to the US/Canadian/European governments about their defaulted loans and demand bail-out money.
Guess who pays these governments?
Ba dorood:
I heard from an analyst that N. America has very little investment in Dubai so it is teh ENGELSTAAN that must be hurt which in turn will effect Islamic Rip-off.
Iranians who have invested in Dubai are simply greedy people and they could have done it else where but they decided to take the chance so it is their own fault.
When I lost money in stock market, nobody said, "I am sorry" to me so what is the difference here?!!
When you invest then you take a chance so got to live with it.
My point here is the stupidity of Arabs who have more money than brain.
I heard from an analyst that N. America has very little investment in Dubai so it is teh ENGELSTAAN that must be hurt which in turn will effect Islamic Rip-off.
Iranians who have invested in Dubai are simply greedy people and they could have done it else where but they decided to take the chance so it is their own fault.
When I lost money in stock market, nobody said, "I am sorry" to me so what is the difference here?!!
When you invest then you take a chance so got to live with it.
My point here is the stupidity of Arabs who have more money than brain.
Ba dorood:
What has taken place in US is not result of the same type of stupidity.
US will come out of this mess as some analysts are stating so.
The concept of making Dubai a resort center of the world was dumb and stupid.
You want to compare this stupidity with the cost of WAR that US has taken on?!!
I don't see them same.
What has taken place in US is not result of the same type of stupidity.
US will come out of this mess as some analysts are stating so.
The concept of making Dubai a resort center of the world was dumb and stupid.
You want to compare this stupidity with the cost of WAR that US has taken on?!!
I don't see them same.
Sure not. Zero-down mortgages, no-rule banking, Enron, on top of a war that no one knows where it is supposed to go.
But the Sheikh of Dubai is blamed for trying to make a successful nation out of his little tribe. And without oil. (If I am not mistaken, Dubai has little oil - most of it is in Abu Dhabi).
BTW you missed the second point: How about the stupidity of us Iranians?! We sure should not be talking about others.
But the Sheikh of Dubai is blamed for trying to make a successful nation out of his little tribe. And without oil. (If I am not mistaken, Dubai has little oil - most of it is in Abu Dhabi).
BTW you missed the second point: How about the stupidity of us Iranians?! We sure should not be talking about others.
Dubai is not going to be in ruins any time soon. It was oil money, it is oil money, and it will be oil money that will bail them out yet again. Most of the money that Dubai has raised to build buildings is from Abu Dhabi, home to 9% of the world oil, 5% of world natural gas, exporter of 2.6M B of oil (now more than Iran) and home to just about 900K people.
The latest is just Abu Dhabi trying to limit its losses on Dubai by passing on a few billion in losses to others because they are tired of bailing out Dubai. And I am sue that Abu Dhabi has lost $100s of billions on Dubai to date.
But as long as they are making $60B in oil profits a year who really cares?
The latest is just Abu Dhabi trying to limit its losses on Dubai by passing on a few billion in losses to others because they are tired of bailing out Dubai. And I am sue that Abu Dhabi has lost $100s of billions on Dubai to date.
But as long as they are making $60B in oil profits a year who really cares?