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Dubai rescue package buoys world markets

LONDON - LONDON (AP) — World markets mostly rose Monday after Dubai said it had received $10 billion in emergency funds from its oil-rich neighbor Abu Dhabi, helping to allay investor fears that the emirate will default on its debt.

In Europe, the FTSE 100 index of leading British shares closed up 53.77 points, or 1 percent, at 5,315.34 while Germany's DAX rose 45.97 points, or 0.8 percent, to 5,802.26. The CAC-40 in France was 26.72 points, or 0.7 percent, higher at 3,830.44.

On Wall Street, the Dow Jones industrial average was up 32.57 points, or 0.3 percent, at 10,500.07 around midday New York time while the broader Standard & Poor's 500 index rose 6.39 points, or 0.6 percent, to 1,112.80.

The gains came after Dubai government said the financing would help pay off $4.1 billion in debts owed by struggling Dubai World's property division and due Monday. The rest would go toward bills and expenses through April.

The news cheered investors — particularly in Dubai where the stock market closed up 10 percent — who had feared the consequences of Dubai World defaulting. Since the state-owned company announced its intention last month to delay payment on its $60 billion in debts, investors have braced for more financial turmoil and been forced to reevaluate their assumptions about government promises to make good on debts.

"Markets have welcomed the news and we continue to think that the fallout from the emirate will be limited," said Kevin Grice, an analyst at Capital Economics.

However, investors around the world remain on alert for any fiscal stresses elsewhere — Greece was once again in the spotlight Monday as investors awaited to hear the government's plans to tackle the budget deficit, which is forecast to shoot up to nearly 13 percent of the country's gross domestic product this year and dragging the country's debt to GDP ratio to a staggering 120 percent next year.

Ahead of Prime Minister George Papandreou's speech later, the Athens Composite Share Price index closed up 2.6 percent at 2,216.94 as investors hoped he would announce at least the beginnings of a cogent strategy.

Underpinning the gains around the world has been solid U.S. economic data over the last couple of weeks, including Friday's retail sales data for November, which helped reinforce hopes that the world's largest economy was recovering solidly from recession.

In conjunction with recent jobs data, analysts said the outlook for the U.S. economy has improved, but that could mean that the U.S. Federal Reserve brings forward its plan to withdraw extraordinary policy measures put in place earlier to avert a total economic collapse.

As a result, investors will be carefully monitoring the Fed's final interest rate meeting of the year on Wednesday even more closely than normal to see if the accompanying statement is slightly more hawkish than before.

Neil Mackinnon, global strategist at VTB Capital, said there's a risk that the Fed could alter the language in its statement and remove the reference to interest rates being low 'for an extended period' — code for keeping interest rates at the current level of near zero percent for a while yet.

Investors are also fully aware that gains could well peter out as this is the last full trading week of 2009 and investors may use the opportunity to bolster their portfolios by locking in gains made over the last nine months.

Earlier in Asia, most stock markets rose with the notable exception of Japan's Nikkei, which closed down 2.19 points at 10,105.68 as investor optimism was weighed down by a fairly sluggish Tankan business confidence survey — it showed only a modest fourth quarter improvement and a continued reluctance by firms to ramp up their investments.

However, Hong Kong's Hang Seng rose 183.64 points, or 0.8 percent, to 22,085.75 and South Korea's Kospi added 7.87 points, or 0.5 percent, to 1,664.77. Elsewhere, Australia's benchmark added 0.4 percent, China's Shanghai's index was up 1.7 percent and Taiwan's market gained 0.3 percent.

Oil prices pushed back above $70 a barrel. Benchmark crude for January delivery was up 25 cents at $70.12 a barrel, while gold rose 0.3 percent to $1,123 an ounce.

Meanwhile, the dollar fell 0.5 percent to 88.52 yen while the euro rose 0.1 percent to $1.4645.

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AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.

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