Daily Market Reports | Nov 27 2009
 By Greg Peel
The US was closed last night for Thanksgiving. However, developments in the Middle East warrant a special Overnight Report.
It has been called the City of Dreams and has become a monument to excess. But the emirate of Dubai is built on sand and, unlike its neighbours, has no oil reserves. Dubai is very much a pre-GFC vision, and post-GFC many commentators have noted that it’s probably only a matter of time.
The driving engine behind Dubai is Dubai World which, among many developments, built the famous Palm Island. Last night it was announced Dubai World has asked its creditors for a freeze on debt repayments until May. It owes US$60bn.
All up, state-owned enterprises in Dubai owe US$80bn, and already this year neighbouring Abu Dhabi – the one with all the oil – has had to assist with a bail-out.
News of the deferral impacted heavily on Europe, where stock markets were down over 3%.
Devoid of US trading, the US dollar jumped 0.8% to 74.80 sending commodities tumbling. Oil (trading on Globex) was down US$1.73 to US$76.23/bbl. Base metals trading on London lost 2-3%. Silver slipped 1%, but gold held fast as safe haven, up US$2.60 to US$1192.70/oz.
Risk spreads on sovereign debt in the Gulf region leapt by double-digit percentages, including those of Abu Dhabi, Qatar, Bahrain and Saudi Arabia. Middle Eastern markets were also closed due to an Islamic feast day. While the debt deferral in Dubai is not a sovereign issue, the ramifications are still ominous. Dubai has constantly scoffed at notions of default but while the details of this deferral remain unclear, Dubai sovereign debt will remain under pressure.
The SPI Overnight was down 41 points or 0.9%. The Aussie was down almost two cents at US$0.9137.
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