World shares at highest level since September

Updated 18 December 2012

World shares at highest level since September

NEW YORK: Signs of compromise in US talks to stop automatic tax hikes and spending cuts hurting the economy next year pushed world shares yesterday to their highest level since September and weakened investor appetite for safe-haven bonds and the dollar.
Wall Street opened slightly higher as investors continued to expect a deal would be reached to avert the “fiscal cliff,” though caution remained in the absence of any concrete progress.
Gains were limited following a steep rally in the previous session, which lifted the S&P 500 to its highest in nearly two months, but hopes for a deal grew on signs of compromise between the major political parties in Washington.
“We’ve been getting a series of snippets suggesting accommodation from both Boehner and Obama, which is feeding the sense in markets that we could get a deal,” said Michael Holland, chairman of Holland & Co. in New York.
Investors have been reluctant to make big bets in the face of the uncertainty over the budget.
“You can never discount the possibility that the government will do something dumb and screw this up, but right now the market is happy over the prospects for a deal,” said Holland, who oversees $ 4 billion in assets.
The political divide narrowed this week when President Barack Obama proposed leaving lower tax rates in place for those earning under $ 400,000, moving closer to the $ 1 million threshold favored by Republican House of Representatives Speaker John Boehner.
The Dow Jones industrial average was up 52.22 points, or 0.39 percent, at 13,287.61. The Standard & Poor’s 500 Index was up 7.60 points, or 0.53 percent, at 1,437.96. The
Nasdaq Composite Index was up 21.77 points, or 0.72 percent, at 3,032.37.
European shares rose close to 2012 highs yesterday, with the FTSEurofirst 300 index up 0.48 percent at 1,138.01.
The rally pushed the MSCI index of global stocks up 0.5 percent, its highest level since September, with an 18-month peak also in sight.
The euro hovered near a 7-1/2-month high against the dollar on the signs of progress in the US budget talks and generally improving investor sentiment on euro zone assets, while market players sold the safe-haven dollar.
The euro was last up 0.1 percent on the day at $ 1.31808, near a 7-1/2 month high of $1.3191 hit on Monday. The dollar index slipped to a two-month low of 79.606.
Brent crude rose 68 cents to $ 108.32 a barrel while US crude oil gained 54 cents to $ 87.74 a barrel. It climbed above the 50-day moving average, a key technical indicator watched by traders, for the first time since early December.
In bond markets, trading remained subdued ahead of the year-end. US and German government bonds futures slipped as increasing signs of progress in the US budget talks eased demand for low-risk assets.
The benchmark 10-year US Treasury note was down 6/32, with the yield at 1.7926 percent.
Sweden cut its interest rates back to 1 percent and Turkey cut rates for the first time in more than a year, while India’s central bank reiterated its guidance of further easing in the first quarter of 2013.
Concerns that new fiscal stimulus could seriously increase the country’s debt burden pushed the benchmark 10-year Japanese government bond yield to a one-month high of
0.750 percent.
With thin trade accentuating moves, Spanish debt extended gains after a final bill sale of the year raised more than the target amount.
Spanish 10-year bond yields fell 7.5 basis points to 5.38 percent while the equivalent Italian debt fell 8 bps to 4.49 percent, back to where it was before Prime Minister Mario Monti sparked a wave of selling earlier this month by announcing he would resign early.

Is the Dubai economy turning the corner?

Updated 13 min 52 sec ago

Is the Dubai economy turning the corner?

  • Expo 2020 expected to boost GDP
  • Relaxation of residency rules helps real estate

LONDON: Is the Dubai economy finally turning the corner? At least one major international bank thinks so.

It follows a move by the emirate's leadership to reboot an economy that has been hit hard by corporate job losses, the introduction of VAT and a slowing real estate sector.

The UAE’s non-oil economy is likely to “turn a corner” next year with Dubai’s Expo 2020 infrastructure projects, changes to visa rules and increased government spending set to boost growth, according to a Bank of America Merrill Lynch (BofAML) research note.

Abu Dhabi National Oil Company’s (ADNOC) downstream expansion plans are also expected to drive the country’s non-oil GDP growth, said the note compiled by Middle East and North Africa (MENA) economist Jean Michel Saliba.

The Gulf country’s real GDP growth is estimated to rise to 3.5 percent in 2019 from a forecast 2.8 percent increase this year and a 1.9 percent increase in 2017, said the note published on Thursday.

Buoyed by a recovery in oil prices, Abu Dhabi approved a 50 billion dirham ($13.6 billion) three-year stimulus package in early June, which BofAML estimated could add 0.4 percentage points to non-oil GDP growth.

ADNOC’s $45 billion five-year downstream investment plan — revealed in May — is estimated to add a further 1.1 percentage point to the emirate’s non-oil growth, the report said.

The Expo 2020 event in Dubai could drive up GDP growth by 2 percentage points between 2020 and 2021, the report said, by boosting job creation, consumption and tourist numbers.

Given the improvement in oil prices, the cost of Abu Dhabi’s stimulus spending is considered “financeable” by BofAML, while Dubai’s spending plans are said to be “modest.”

Recent structural reforms, including plans to introduce long-term expatriate visas for up to 10 years, could help to boost the UAE’s population and consumer demand, the note said.

“The new UAE long-term and temporary visa system should facilitate retention of white-collar expatriates,” it said.

“As we expect longer-term visas not to be linked to continued employment, this may increase expatriate incentives to acquire property and support real estate demand.”

The UAE announced in May that it would allow 100 percent foreign ownership of UAE companies in specific industries by the end of the year, a move that could give a welcome boost to foreign direct investment in the country.

A new UAE-wide insurance scheme may provide a one-time boost to corporate profits, the note said.

The UAE cabinet approved plans in June for the insurance scheme to replace the previous system whereby employers had to provide a monetary guarantee to cover each of their workforce.

The move is likely to free up capital that companies could choose to sit on or to reinvest, BofAML said.

“Should corporates invest, we estimate this could lead to a one-off 0.1percentage point boost to UAE non-hydrocarbon real GDP growth,” the report said.