Dubai Continues to Pressure European Stock Indices

European stock indices felt the effects of the ‘Dubai shock’ on Monday, and the start of this week’s trading on the American markets and a new set of economic indicators will serve as new guidance for investors.

In such circumstances, the Ftse index managed to remain slightly positive, up 0.14 percent, at 5,201 points. The Frankfurt DAX, on the other hand, fell by just over one percent, to 5,625 points. Investors in Europe remain concerned about the announcement from Dubai World that it will seek a moratorium from creditors on debt repayments for at least six months. It is assumed that European banks, particularly those in the United Kingdom, are the creditors of the majority of the total $60 billion debt of this government investment company.

They are also worried that Dubai’s troubles could herald similar problems in other countries, although the local central bank has promised additional funds to all banks in the country, including foreign financial institutions with local branches. “This is a warning that the risks associated with sovereign debt repayment are likely to remain a problem, for example in the case of Greece, Ireland, and the United Kingdom, and that the rising share of deficits and public debt relative to gross domestic product will remain a key issue for some time,” said Neil Mackinnon, global strategist at VTB Capital.

In search of guidance, investors will focus on today’s opening of the American markets for further reactions from local investors regarding the news from Dubai, which was released just during the American holiday of Thanksgiving. Greater attention will also be drawn to the latest set of indicators from the world’s largest economy, particularly regarding employment, which is expected at the end of the week and will determine sentiment in the next week or two. If analysts conclude that the American economy is losing momentum, this could pave the way for profitable sales in the final weeks of this year, following an eight-month rise in prices. The Tokyo Stock Exchange’s Nikkei index strengthened by 2.9 percent, to 9,345 points. (H)