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Monday, November 30, 2009

Morning Market Report

The debt crisis in Dubai has changed the dynamics in the markets. Now, the question is how. Over the weekend, here's the latest details. First, the UAE rushed to back the debt. Second, the markets internally in Dubai had a sort of Black Monday.

Dubai's stock market saw its biggest one-day decline since Oct 2008, and Abu Dhabi's bourse saw its biggest ever fall when they reopened on Monday after a four-day Muslim holiday.

"The falls were expected. We were hoping for a government statement that would alleviate concerns," said Haissam Arabi, chief executive at Gulfmena Alternative Investments.

One internal Dubai indix fell 8.3% and another broader index fell 7.2%. Meanwhile, markets in the rest of the world were much more mixed. (more on that later) Dubai is a small country far away from here but for the time being it is the center of the financial world.

The second story to watch continues to be the dollar's relationship against the equity markets. There continues to be a troubling trend there. The dollar strengthened on the Dubai news just as the three indices shed north of 1.5% on Friday. Meanwhile, bonds are taking a small breather this morning. The ten year U.S. Treasury is at 3.23%. That's off 3 basis points but still near three month lows. That showed massive strength following the Dubai news. The three month t bill is now trading at .03%. That's at least positive and hasn't tested a negative rate since reaching there the week prior. It's still in the vicinity and so that's another security to watch. The yield spread between the two and ten year has tightened to 2.52%. Oil is up slightly to $76.20 a barrel. Gold continues to trade near all time highs at $1172 an ounce.

Markets in the Far East were up on a good day while they're currently down marginally in Europe. The Hang Seng was up 3.25%, the NIKKEI from Japan was up 2.91%, the Straits Time Index in Singapore was down 1.09%, while the broader Chinese index was up 3.20%. In Europe, the FTSE was down .6%, and the DAX in Germany was down .85%.

Currencies are almost unchanged. The Euro is up .38% against the Dollar, the British Pound is up .08% and the Japanese Yen is .03%.

Finally, the administration plans on announcing an expansion to their loan modification program this week. Details are still scarce however the program has failed on every level thus far.

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