US stock futures tumble on fears over Dubai debt
US stock futures tumble as world market slide on fears over fallout from Dubai debt problems
- On 7:22 am EST, Friday November 27, 2009
Stock futures fell more than 2 percent and Treasury prices jumped sharply. The dollar gained against most other major currencies as investors sought safety following steep drops in overseas markets Thursday and again Friday. Commodities prices tumbled.
U.S. markets were closed Thursday for Thanksgiving.
Investors are worried that a default by a government investment company in Dubai over $60 billion in debt payments could have a ripple effect in world financial markets. The fear is that losses in the small emirate, which has drawn wealthy tourists from around the globe in the past decade with its Las Vegas-in-the-Middle East appeal, could imperil a nascent economic rebound.
Worries about bad debt are fresh in investors' minds after the collapse of the U.S. brokerage Lehman Brothers in September last year pushed the world overnight deeper into recession as banks halted lending on fears of a domino effect of bad loans.
The latest trouble on Wall Street come as the U.S. kicks off the unofficial start to the holiday shopping season. Investors will be tracking news from retailers for insights into how much consumers will spend in the coming month. Consumer spending is the biggest driver of the U.S. economy.
Dow Jones industrial average futures are down 222, or 2.1 percent, at 10,220. Standard & Poor's 500 index futures are down 29.20, or 2.6 percent, at 1,079.70. Nasdaq 100 index futures are down 47.25, or 2.6 percent, at 1,747.00.
Trading volume had been expected to be light ahead of a shortened trading session. Light volume could trigger volatility. Stock markets close three hours early, at 1 p.m. EST. Bond markets close a 2 p.m.
Investors rushed into the safety of U.S. government debt. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.22 percent from 3.28 percent late Wednesday. The yield on the three-month T-bill rose to 0.04 percent from 0.03 percent.
The ICE Futures U.S. dollar index, which measures the greenback against a basket of foreign currencies, rose 0.6 percent. The yen, also a safe-haven currency, was higher, hitting a 14-year high against the dollar.
Commodities, which are priced in dollars, fell as the dollar gained. The move reflected an unwinding of trades that relied on a weak dollar to finance purchases of higher-yielding assets. Spooked traders reversing the so-called "carry trade" were demanding safe-haven assets.
Light, sweet crude fell $3.68 to $74.28 in electronic trading ahead of the open of the New York Mercantile Exchange.
European markets, which fell more than 3 percent Thursday, pulled off their worst levels Friday. In afternoon trading, Britain's FTSE 100 fell 0.5 percent, Germany's DAX index fell 0.5 percent and France's CAC-40 fell 0.3 percent.
In Asia, Japan's Nikkei stock average slid 3.2 percent. Hong Kong's Hang Seng index tumbled 4.8 percent. South Korea's benchmark dropped 4.7 percent.
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Dubai woes hit world stocks again; Asia down most
Dubai debt trouble weighs on world markets again; Asia bears brunt of selling
* By Pan Pylas, AP Business Writer
* On 7:38 am EST, Friday November 27, 2009
LONDON (AP) -- European stock markets regained their poise Friday but Asia fell sharply as investors weighed the impact that Dubai's trouble with $60 billion in debt would have on the global financial and economic recovery.
AP - A money trader work at a dealing room the U.S. dollar rate against Japanese yen on the Foreign ...
AP - A money trader work at a dealing room the U.S. dollar rate against Japanese yen on the Foreign ...
Market confidence has been hit hard by Wednesday's news that Dubai World, a government investment company, has asked creditors if it can postpone its forthcoming payments until May. That stoked fears, mainly in Europe on Thursday, of a potential default and contagion around the global financial system, particularly in emerging markets.
Asian stocks were particularly badly hit as they played catch-up following the big losses in Europe in the previous session. Hong Kong's Hang Seng closed 1,075.91 points, or 4.8 percent, lower at 21,134.50, while South Korea's benchmark plummeted 4.7 percent to 1,524.50.
In Europe, the FTSE 100 index of leading British shares was down 14.18 points, or 0.3 percent, at 5,179.95, while Germany's DAX fell 13.08 points, or 0.2 percent, to 5,601.09. The CAC-40 in France was 15.02 points, or 0.4 percent, lower at 3,664.21. On Thursday, Europe's main indexes slid over 3 percent, with banks, especially those thought to have exposure to Dubai such as Barclays PLC, HSBC PLC and Standard Chartered PLC, particularly badly hit.
All eyes in Europe will be on Wall Street, which was closed Thursday for the Thanksgiving Holiday. Expectations are that it will open down but that the selling won't turn into a rout -- Dow futures were down 236 points, or 2.3 percent, at 10,206 while the broader Standard & Poor's 500 futures slid 31.1 points, or 2.8 percent, at 1,077.80.
"It is likely to take at least a few days before the implications of the impact of a possible default from Dubai are properly digested but for the present it seems that the market is seeing this negative news as a blow to the global recovery but not one that will push it off course," said Jane Foley, research director at Forex.com.
Across all markets, there is a growing awareness that investors may use the upcoming year-end to lock-in whatever profits have been made over the last 12 months.
"Market cynics have been looking for a correction in the equity market, which has blazed the trail in the past seven months," said David Buik, markets analyst at BGC Partners.
"However they have been unable to find sufficient reasons to nail their flag to the mast, by taking profits, whilst alternative asset classes were unattractive options -- well they certainly found an excuse yesterday with the Dubai debt debacle," he added.
Investors were also keeping a close eye on associated developments in the currency markets after the dollar slid to a new 14-year low of 84.81 yen.
However, the dollar climbed back off its lows to 86.46 yen amid mounting expectations that the Bank of Japan may intervene in the markets by buying dollars or selling yen after Japan's finance minister Hirohisa Fujii said he was "extremely nervous" about the movements in the yen and that the "market had moved too far in one direction."
On Thursday, the Swiss National Bank reportedly intervened to buy dollars to prevent the export-sapping appreciation of the Swiss franc. That seems to have worked -- for now, at least -- as the dollar has moved back above parity, trading 0.9 percent higher at 1.0118 Swiss francs.
The British pound has also been battered amid fears about the exposure of Britain's banks to the region. The pound was down 0.9 percent at $1.6375.
Another currency losing some of its shine was the euro, which fell 0.8 percent to $1.4906 -- in times of uncertainty the dollar is considered to be more of a safe haven currency. Investors are also concerned about the exposure of European banks to Dubai.
Elsewhere in Asia, Japan's Nikkei 225 stock average fell 301.72 points, or 3.2 percent, to 9,081.52 while Australia's index dropped 2.9 percent. China's main Shanghai stock measure was off 2.4 percent.
Oil, meanwhile, tracked developments in stock markets and benchmark crude for January delivery fell $3.79 to $74.17 a barrel in electronic trading on the New York Mercantile Exchange.
AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.
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