Stocks, Futures Rebound as Dubai Gets Nakheel Funds; Oil Falls

By Chua Kong Ho and Masaki Kondo
Dec. 14 (Bloomberg) -- Asian stocks and U.S. index futures rebounded from losses as Abu Dhabi provided $10 billion to avert Dubai’s Nakheel PJSC from a default. Oil fell for a ninth day, the longest losing streak in eight years, after a report showed Japan’s exporters scaling back investment plans.
The MSCI Asia Pacific Index rose 0.53 percent to 120.31 at
6:45 p.m. in Tokyo. The Dow Jones Stoxx 600 Index gained 0.8 percent and futures on the Standard & Poor’s 500 Index rose 0.6 percent. Dubai shares posted the biggest two-day gain in more than a year. Crude oil for January delivery fell 0.5 percent to
$69.52 after dropping as low as $68.59 a barrel in after-hours electronic trading on the New York Mercantile Exchange.
Abu Dhabi’s pledge will allow Dubai World’s Nakheel real- estate subsidiary to make $4.1 billion of payments on bonds that mature today. Markets tumbled last month when Dubai said it was starting talks with international lenders to restructure debt accumulated during the emirate’s five-year real-estate boom. The announcement reassured investors after Japan’s Tankan business confidence index posted its smallest gain since the economy began to emerge from the global recession.
"Markets are likely to take the news positively in the immediate term as concerns are lifted," said Lee King Fuei, a Singapore-based fund manager at Schroders Plc, which oversees
$222 billion. "In the longer term, Dubai is a symptom of a problem over the past decade of excessively loose credit and liquidity and that requires a long time to work through."

Share Movers

Consumer and commodities stocks led the gains in the MSCI Asia index. The MSCI World Index rose 0.2 percent, recovering from a 0.1 percent loss, after the Abu Dhabi announcement.
Futures on the S&P 500 climbed 6.4 points to 1,109.60. The index added 0.4 percent on Dec. 11 as better-than-estimated U.S.
retail sales and consumer confidence reports fueled optimism for economic growth.
Bank shares led the advance in Europe. HSBC, which had
$15.9 billion in loans and advances to customers in the U.A.E.
at the end of June, climbed 2.9 percent to 723.6 pence. Standard Chartered, the U.K. bank that gets most of its profit in emerging markets, rallied 4.8 percent to 1,582.5 pence.
Lloyds Banking Group Plc gained 2.3 percent to 57.5 pence.
The U.K’s largest mortgage lender said investors bought 95.3 percent of the stock on sale in its 13.5 billion-pound ($22 billion) rights offering, Britain’s biggest.
"Since the Dubai debt problem occurred, investors have shunned away from risk assets, such as equities, commodities and higher-yield currencies," said Masayuki Kubota, who oversees the equivalent of $1.7 billion in assets in Tokyo at Daiwa SB Investments Ltd. "If the issue is resolved, it will have a positive impact on investor sentiment."

Nakheel Debt

Nakheel, the builder of palm-shaped islands in the Persian Gulf, needed $4.1 billion to repay Islamic bonds maturing today.
The rest will pay trade creditors, contractors, interest expenses and working capital through April 30, "conditioned on the company being successful in negotiating a standstill as previously announced," the Dubai government said in an e-mailed statement today.
The bonds, which had $3.52 billion principal, were the biggest maturity for a Dubai entity since global credit markets froze after the September 2008 collapse of Lehman Brothers Holdings Inc. Nakheel accumulated debt during a real-estate boom, when the sheikhdom borrowed $10 billion and its state-controlled companies $70 billion to help diversify the economy.
Nakheel’s Islamic bonds due 2011 surged to 81.4 cents on the dollar from 36 on Dec. 11, according to Citigroup Inc. prices at 9 a.m. in London. Prices on bonds due today rose to 109.5 cents on the dollar from 53 cents, the biggest gain in at least two years.

Dubai Stocks, Swaps

Dubai’s DFM General Index rose 3.3 percent to 1695.35, bringing its two-day gain to 11 percent, the most since October 2008. The measure had lost 19 percent since Dubai World on Nov. 25 sought a "standstill" agreement on its debt. Abu Dhabi’s measure climbed 4.5 percent.
The euro and the British pound strengthened against the dollar and the yen after the Dubai announcement reduced the prospects of losses and writedowns for European and British banks. HSBC Holdings PLC rose 1.4 percent and Standard Chartered PLC jumped 4.8 percent in Hong Kong trading.
The cost of protecting Dubai government debt from default plunged by the most since February after neighboring Abu Dhabi pledged $10 billion in aid to help the emirate meets its obligations.
Five-year credit-default swaps on Dubai fell 175 basis points to 375 basis points, according to National Australia Bank Ltd. prices at 5.10 p.m. in Sydney. That’s the biggest decline since the contracts fell 178 basis points on Feb. 23, according to CMA DataVision in New York, when the United Arab Emirates’
central bank bought $10 billion of Dubai’s bonds.

Japan’s Recovery

The Nikkei 225 Stock Average was little changed at 10,105.68 in Tokyo after falling as much as 1 percent. The broader Topix index declined 0.4 percent to 885.08. Almost four stocks fell for every three that rose. Mitsubishi UFJ Financial Group Inc., Japan’s largest bank by market value, declined 2.9 percent, after the Tankan survey.
"Weak capital investment shows we can’t expect a robust recovery in the domestic economy in the coming months," said Hiroshi Morikawa, a senior strategist in Tokyo at MU Investments Co., which manages $14 billion. "Unless businesses invest, the recovery led by exports won’t spread to the domestic economy."
Oil fell after the Tankan index raised concerns that demand will be insufficient to keep prices rising after crude’s 55 percent gain this year. Japan is the world’s third-biggest user.

Oil and Dollar

Fuel deliveries in the U.S., the world’s biggest consumer, averaged 18.5 million barrels a day in the four weeks ended Dec.
4, 3 percent less than a year earlier, the Energy Department reported last week. Crude has also fallen as the dollar strengthened 2.4 percent against the euro so far this month.
"If we were trading on fundamentals, oil would be below $60," said Victor Shum, a senior principal at consultants Purvin & Gertz Inc. in Singapore. "The worst of the financial crisis is behind us, but that doesn’t mean we’re out of the woods. If governments and central banks tighten up monetary and fiscal policies, the private sector may not be able to sustain growth."
Treasuries were little changed, losing an initial gain, after the Dubai announcement reduced demand for the relative safety of government securities.
The yield on the 10-year Treasury was 3.55 percent as of
1:47 p.m. in Tokyo, according to BGCantor Market Data. The 3.375 percent security due in November 2019 traded at 98 18/32. It was up earlier 9/32 as investors awaited the Dubai announcement.
"There’s some unwinding of the flight to quality," said Yasutoshi Nagai, chief economist at Daiwa Securities SMBC Co. in Tokyo, part of Japan’s second-largest brokerage.
Gold for immediate delivery advanced 1 percent to $1,126.90.
Copper for delivery in three months on the London Metal Exchange rallied 1.2 percent to $6,920 a metric ton.