While you were sleeping: Abu Dhabi may support Dubai; dollar weakens vs yen

Monday 30th November 2009

Abu Dhabi, the capital of the United Arab Emirates, has signalled it will provide ‘selective’ support for neighbouring emirate Dubai, which sent markets reeling with its announcement that it wants to reschedule its debt.

"We will look at Dubai's commitments and approach them on a case-by-case basis,” Reuters reported an Abu Dhabi government official as saying. “It does not mean that Abu Dhabi will underwrite all of their debts."

Dubai-based companies account for at least 30% of Abu Dhabi banks’ loan books and Abu Dhabi has already provided US$15 billion in indirect support for its neighbour, according to the report.

Dubai World has US$59 billion of liabilities including the US$3.5 billion Islamic bond of its Nakheel real estate unit.

The dollar sank to its lowest level against the yen since 1995 and weakened against the euro after the Federal Reserve signalled it will live with a weaker currency.

The dollar weakened 0.2% to 86.42 yen on Friday in New York having sunk to a low as 84.83 yen. The greenback fell 0.3% to US$1.4988. The yen rose 0.4% to 129.5 per euro.

The Dollar Index, which measures the greenback against the currencies of six major trading partners, rose 0.1% to 74.86.

The Standard & Poor’s 500 fell 1.7% to 1091.49 on Friday in New York and the Dow Jones Industrial Average dropped 1.5% to 10309.92. The Nasdaq Composite fell 1.7% to 2138.44.

Bank of America sank 3% to US$15.47, Caterpillar dropped 2.7% to US$57.45 and Alcoa Inc. fell 2.6% to US$12.66. Exxon Mobil fell 2.1% to US$74.87 as the price of crude slid. Bond insurer MBIA Inc. weakened 6.1% to US$3.40.

Gold fell in New York on Friday.

Gold futures for February delivery dropped 1.1% to US$1,175.50 an ounce on the New York Mercantile Exchange.

Copper fell as Dubai’s debt delay eroded investor appetite for riskier investments.

Copper futures for March delivery fell 2.2% to US$3.1255 a pound on the New York Mercantile Exchange.

Crude oil also fell as jitters about Dubai weighed on markets.

Crude oil for January delivery sank US$1.91 to US$76.05 a barrel on the New York Mercantile Exchange.

Royal Dutch Shell said 2010 will be “quite a difficult year” in terms of consumer demand, chief executive Peter Voser told a conference. "We have most probably seen the bottom and it will go up, but it will go up slowly."

The German economy may shrink 4% to 5% this year, less than earlier predictions of a 6% slump, Chancellor Angela Merkel said in a podcast.

"Even if we end up between 4% and 5%, it will still be the worst contraction ever in (post-war) Germany," she said.

The nation’s previous worst post-war slump was in a 0.9% decline in 1975.

Stocks were stronger in Europe on Friday. The Dow Jones Stoxx 600 climbed 1.2% to 242.60. Among national benchmarks, the U.K.’s FTSE 100 rose 1% to 5245.73, Germany’s DAX 30 gained 1.3% to 5685.61 and France’s CAC 40 rose 1.2% to 3721.45.

Businesswire.co.nz

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