Dec. 14 (Bloomberg) -- Asian stocks and U.S. index futures rebounded from losses as Abu Dhabi provided $10 billion to avert Dubai’s Nakheel PJSC from a default. Oil fell for a ninth day, the longest losing streak in eight years, after a report showed Japan’s exporters scaling back investment plans.
The MSCI Asia Pacific Index rose 0.5 percent to 120.32 at 4:45 p.m. in Tokyo. Futures on the Dow Jones Euro Stoxx 50 gained 1.1 percent and futures on the Standard & Poor’s 500 Index rose 0.7 percent. Dubai shares surged the most in 14 months. Crude oil for January delivery fell 0.7 percent to $69.37 after dropping as low as $68.59 a barrel in after-hours electronic trading on the New York Mercantile Exchange.
Abu Dhabi’s pledge will allow Dubai World’s Nakheel real- estate subsidiary to make $4.1 billion of payments on bonds that mature today. Markets tumbled last month when Dubai said it was starting talks with international lenders to restructure debt accumulated during the emirate’s five-year real-estate boom. The announcement reassured investors after Japan’s Tankan business confidence index posted its smallest gain since the economy began to emerge from the global recession.
“Markets are likely to take the news positively in the immediate term as concerns are lifted,” said Lee King Fuei, a Singapore-based fund manager at Schroders Plc, which oversees $222 billion. “In the longer term, Dubai is a symptom of a problem over the past decade of excessively loose credit and liquidity and that requires a long time to work through.”
Stocks Recover
Consumer and commodities stocks led the gains in the MSCI Asia index. The MSCI World Index rose 0.2 percent, recovering from a 0.1 percent loss, after the Abu Dhabi announcement. Futures on the S&P 500 climbed 8.2 points to 1,111.40. The index added 0.4 percent on Dec. 11 as better-than-estimated U.S. retail sales and consumer confidence reports fueled optimism for economic growth.
“Since the Dubai debt problem occurred, investors have shunned away from risk assets, such as equities, commodities and higher-yield currencies,” said Masayuki Kubota, who oversees the equivalent of $1.7 billion in assets in Tokyo at Daiwa SB Investments Ltd. “If the issue is resolved, it will have a positive impact on investor sentiment.”
Nakheel, the builder of palm-shaped islands in the Persian Gulf, needed $4.1 billion to repay Islamic bonds maturing today. The rest will pay trade creditors, contractors, interest expenses and working capital through April 30, “conditioned on the company being successful in negotiating a standstill as previously announced,” the Dubai government said in an e-mailed statement today.
Biggest Maturity
The bonds, which had $3.52 billion principal, were the biggest maturity for a Dubai entity since global credit markets froze after the September 2008 collapse of Lehman Brothers Holdings Inc. Nakheel accumulated debt during a real-estate boom, when the sheikhdom borrowed $10 billion and its state-controlled companies $70 billion to help diversify the economy.
Nakheel’s maturing bonds traded at 53.5 cents on the dollar earlier today, according to Barclays Capital prices, up from 47 cents on Dec. 8.
Dubai’s DFM General Index added 10 percent, the most since October 2008, to 1,866.82 at 10:04 a.m. in the emirate. The measure had lost 19 percent since Dubai World on Nov. 25 sought a “standstill” agreement on its debt. Abu Dhabi’s measure climbed 6.1 percent.
Euro, Pound Rally
The euro and the British pound strengthened against the dollar and the yen after the Dubai announcement reduced the prospects of losses and writedowns for European and British banks. HSBC Holdings PLC rose 1.8 percent and Standard Chartered PLC jumped 3.9 percent in Hong Kong trading.
The cost of protecting Dubai government debt from default plunged by the most since February after neighboring Abu Dhabi pledged $10 billion in aid to help the emirate meets its obligations.
Five-year credit-default swaps on Dubai fell 175 basis points to 375 basis points, according to National Australia Bank Ltd. prices at 5.10 p.m. in Sydney. That’s the biggest decline since the contracts fell 178 basis points on Feb. 23, according to CMA DataVision in New York, when the United Arab Emirates’ central bank bought $10 billion of Dubai’s bonds.
The Nikkei 225 Stock Average was little changed at 10,105.68 in Tokyo after falling as much as 1 percent. The broader Topix index declined 0.4 percent to 885.08. Almost four stocks fell for every three that rose. Mitsubishi UFJ Financial Group Inc., Japan’s largest bank by market value, declined 2.9 percent, after the Tankan survey.
“Weak capital investment shows we can’t expect a robust recovery in the domestic economy in the coming months,” said Hiroshi Morikawa, a senior strategist in Tokyo at MU Investments Co., which manages $14 billion. “Unless businesses invest, the recovery led by exports won’t spread to the domestic economy.”
Oil Falls
Oil fell after the Tankan index raised concerns that demand will be insufficient to keep prices rising after crude’s 55 percent gain this year. Japan is the world’s third-biggest user.
Fuel deliveries in the U.S., the world’s biggest consumer, averaged 18.5 million barrels a day in the four weeks ended Dec. 4, 3 percent less than a year earlier, the Energy Department reported last week. Crude has also fallen as the dollar strengthened 2.4 percent against the euro so far this month.
“If we were trading on fundamentals, oil would be below $60,” said Victor Shum, a senior principal at consultants Purvin & Gertz Inc. in Singapore. “The worst of the financial crisis is behind us, but that doesn’t mean we’re out of the woods. If governments and central banks tighten up monetary and fiscal policies, the private sector may not be able to sustain growth.”
Treasuries Pare Gains
Treasuries were little changed, losing an initial gain, after the Dubai announcement reduced demand for the relative safety of government securities.
The yield on the 10-year Treasury was 3.55 percent as of 1:47 p.m. in Tokyo, according to BGCantor Market Data. The 3.375 percent security due in November 2019 traded at 98 18/32. It was up earlier 9/32 as investors awaited the Dubai announcement.
“There’s some unwinding of the flight to quality,” said Yasutoshi Nagai, chief economist at Daiwa Securities SMBC Co. in Tokyo, part of Japan’s second-largest brokerage. “It seems that the government of Dubai secured the funds.”
Gold for immediate delivery advanced 1 percent to $1,126.90. Copper for delivery in three months on the London Metal Exchange rallied 1.2 percent to $6,920 a metric ton.
To contact the reporters on this story: Chua Kong Ho in Shanghai at Kchua6@bloomberg.net; Masaki Kondo in Tokyo at mkondo3@bloomberg.net
