Shares in Europe rebound
Shares in Europe rebound
Euro zone finance ministers, the International Monetary Fund and the European Central Bank will gather again Monday after nearly 12 hours of talks failed to produce a consensus on how to bring Greece's debts down.
After the meeting ended, French Finance Minister Pierre Moscovici said a deal was just "a whisker away," while European paymaster Germany said a plan to provide Greece with funding until 2016 was being developed.
Shares in Europe rebounded from early losses. The FTSEurofirst 300 index of top shares closed 0.3 percent higher while the Euro STOXX 50 rose 0.5 percent after dropping earlier.
"European exchanges themselves are doing okay, so investors are saying 'we didn't really expect a resolution (on Greece),' just kind of learning to live with it," said Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois.
US stocks were little changed ahead of a national holiday today for Thanksgiving. The Dow Jones Industrial Average was up 30.49 points, or 0.24 percent, at 12,819.00. The Standard & Poor's 500 Index was up 0.55 points, or 0.04 percent, at 1,388.36. The Nasdaq Composite Index was up 2.96 points, or 0.10 percent, at 2,919.65.
Investors in the US digested the latest data, including weekly jobless claims that met expectations and a final read on November consumer sentiment that was below forecasts.
The benchmark 10-year US Treasury note was down 8/32, with the yield at 1.6933 percent.
The euro was flat at $ 1.282, also rebounding from earlier weakness of as much as 0.5 percent.
Prices for German debt, the safest in the euro zone, had eased slightly, sending 10-year yields down modestly to 1.45 percent.
However, a sale of 3.25 billion euros ($ 4.2 billion) of new German 10-year debt, which paid an interest rate of 1.5 percent, drew solid demand from investors worried about the outlook.
Before the Greek impasse, world equity markets had come under pressure by a warning Tuesday from Federal Reserve Chairman Ben Bernanke that the central bank lacked the tools to cushion the impact of a potential US fiscal crisis.
Bernanke said worries over fiscal negotiations, aimed at preventing a series of mandatory tax increases and spending cuts early next year, had already damaged growth in the world's largest economy. His comments snapped a two-day rally on Wall Street Tuesday, but the MSCI world equity index later rose 0.1 percent.
Asian shares had initially fallen in reaction to the Greek aid payment delay, but recovered to close slightly higher due to a rise in mainland Chinese markets and in Tokyo.
MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.2 percent, while Japan's Nikkei
The Nikkei's gains came as shares of exporters rose, after the yen hit a seven-month low against the dollar, on expectations a new government will aggressively push the Bank of Japan to expand monetary stimulus.
Japan's opposition Liberal Democratic Party, tipped to win next month's general election, also promised to boost spending as it emerged that exports had fallen in annual terms for a fifth straight month in October.
The yen rose 0.8 percent to the dollar, bouncing off its weakest level since early April. The US dollar was flat against a basket of currencies, while Brent crude rose 0.5 percent.
Oil was supported in the wake of an explosion on a bus in Tel Aviv, Israel, on fears that clashes between Gaza and Israel could lead to a wider regional conflict that would disrupt oil flows.
"There are opposing forces where the uncertainty in Europe and the United States meets with the bullish uncertainty in the Middle East ... so I think we're going to see a volatile market," said Jeremy Friesen, commodity strategist at Societe Generale in Hong Kong.
Gulf companies challenged by debt and rising interest rates
- Debt restructurings on the rise, but below crisis levels
- Central Bank of the UAE has raised interest rates four times since last March
There has been an uptick in recent months in heavily-borrowed companies in the Gulf seeking to restructure their debts with lenders. Although the pressure on companies is not comparable to levels witnessed in the region following the 2008 global financial crisis, rising interest rates will eventually begin to have a greater impact, say experts.
Speaking exclusively to Arab news, Matthew Wilde, a partner at consultancy PwC in Dubai, said: “We do expect that interest rate increases will gradually start to impact companies over the next 12 months, but to date the impact of hedging and the runoff of older fixed rate deals has meant the impact is fairly muted so far.”
The Central Bank of the UAE has raised interest rates four times since the start of last year, in line with action taken by the US Federal Reserve. The Fed has signalled that it will raise interest rates at least twice more before the end of the year.
Wilde added that there had been a little more pressure on company balance sheets of late, although “this shouldn’t be overplayed”.
Nevertheless, just last week, Stanford Marine Group — majority owned by a fund managed by private equity firm Abraaj Group — was reported by the New York Times to be in talks with banks to restructure a $325 million Islamic loan. The newspaper cited a Reuters report that relied on “banking sources”.
The Dubai-based oil and gas services firm, which has struggled as a result of the downturn in the hydrocarbons market since 2014, has reportedly asked banks to consider extending the maturity of its debt and restructuring repayments, after it breached certain loan covenants.
A fund managed by Abraaj owns 51 percent of Stanford Marine, with the remaining stake held by Abu Dhabi-based investment firm Waha Capital. Abraaj declined to comment.
Dubai-based theme parks operator DXB Entertainments struck a deal last month with creditors to restructure 4.2 billion dirhams ($1.1 billion) of borrowings, with visitor numbers to attractions such as Legoland Dubai and Bollywood Parks Dubai struggling to meet visitor targets.
Earlier this month, Reuters reported that Sharjah-based Gulf General Investment Company was in talks with banks to restructure loan and credit facilities after defaulting on a payment linked to 2.1 billion dirhams of debt at the end of last year.
Dubai International Capital, according to a Bloomberg report from December, has restructured its debt for the second time, reaching an agreement with banks to roll over a loan of about $1 billion. At the height of the emirate’s boom years, DIC amassed assets worth about $13 billion, including the owner of London’s Madame Tussauds waxworks museum, as well as stakes in Sony and Daimler. The firm was later forced to sell most of these assets and reschedule $2.5 billion of debt after the global financial crisis.
Wilde told Arab News: “We have seen an increasing number of listed companies restructuring or planning to restructure their capital recently — including using tools such as capital reductions and raising capital by using quasi equity instruments such as perpetual bonds.”
This has happened across the region and PwC expected this to accelerate a little as companies “respond to legislative pressures and become more familiar with the options available to fix their problems,” said Wilde.
He added that the trend was being driven by oil prices remaining below historical highs, soft economic conditions, and continued caution in the UAE’s banking sector.
On the debt restructuring side, Wilde said there had been a “reasonably steady flow of cases of debts being restructured”.
However, the volume of firms seeking to renegotiate debt remains small compared to the level of restructurings witnessed in the aftermath of Dubai’s debt crisis.
Several big name firms in the emirate were caught out by the onset of the global financial crisis, which saw the emirate’s booming economy and real estate market go into reverse.
State-owned conglomerate Dubai World, whose companies included real-estate firm Nakheel and ports operator DP World, stunned global markets in November 2009 when it asked creditors for a six-month standstill on its obligations. Dubai World restructured around $25 billion of debt in 2011, followed by a $15 billion restructuring deal in 2015.
“We would not expect it to become (comparable to 2008-9) so barring some form of sharp external impetus such as global political instability or a protectionist trade war,” said Wilde.
Nor did he see the introduction of VAT as particularly driving this trend, but rather as just one more factor impacting some already strained sectors (e.g. some sub sectors of retail) “which were already pressured by other macro factors.”