US retailing fears weigh on world markets

LONDON  — European and U.S. stock markets fell Monday amid concerns about the start of the Christmas shopping season in the U.S. and despite relief over the pledge from the United Arab Emirates' central bank to back lenders exposed to Dubai's debt problems.

In Europe, the FTSE 100 index of leading British shares closed down 55.05 points, or 1.1 percent, at 5,190.68 while Germany's DAX ended 59.66 points, or 1.1 percent, lower at 5,625.95. The CAC-40 in France was 41.30 points, or 1.1 percent, lower at 3,680.15.

Earlier, European stocks had steadied as concerns about the fallout from Dubai's debt woes were soothed by the UAE central bank pledge to stand behind local and foreign banks.

However, a renewed bout of selling on Wall Street prompted a late reverse — the Dow Jones industrial average was down 33.63 points, or 0.3 percent, at 10,276.29 around midday New York time while the broader Standard & Poor's 500 index fell 3.71 points, or 0.3 percent, to 1,087.78.

Analysts said the soft start to the week was due to some disappointment at the start of holiday shopping season in the U.S. after preliminary figures by ShopperTrak, a research firm that tracks more than 50,000 outlets, showed sales rose 0.5 percent on Friday.

“Admittedly last year, it was minus 10 percent but I was expecting a bit better than the figure posted,” said David Buik, markets analyst at BGC Partners.

Retail sales are particularly important when assessing the outlook for the global economy — without the help of U.S. consumer spending, which accounts for around 70 percent of the U.S. economy, any global economic recovery will be modest.

Economic news will increasingly take center stage over the rest of the week, culminating in Friday's U.S. nonfarm payrolls report for November — the jobs data often sets the tone in markets for a week or two.

However, there are other important U.S. releases due, including the Institute for Supply Management's surveys into the services and manufacturing sectors.

If investors conclude that the U.S. economy is losing some steam, then that could well pave the way for an end of year bout of profit-taking following an eight-month bull run.

Last week's announcement from Dubai World, a government investment company with some $60 billion worth of debts, that it wanted to postpone forthcoming debt payments until May sent shockwaves around financial markets and a big retreat in stocks, particularly in Europe and Asia. The U.S. avoided much of the immediate fallout as traders were on holiday for Thanksgiving.

Those shockwaves were still evident in the emirates' stock markets Monday, where traders returned from the Eid holiday, but the central bank's reassurances steadied market confidence elsewhere.

“The statement by the UAE central bank over the weekend, where it committed itself to providing liquidity to banks, appears to have calmed any remaining nerves,” said David Jones, chief market strategist at IG Index.

“Traders, for now at least, seem happy to take the view that this is a localized problem and not the start of Credit Crunch Part 2,” he added.

Though the markets have managed to steady Monday, there are still concerns that Dubai's problems may be a harbinger of things to come, even though the announcement from the UAE central bank may minimize the risk of contagion.

“It is a warning sign that sovereign credit risks are likely to remain a problem — Ireland, Greece and Britain, for example — and the deterioration in budget deficits and debt/GDP ratios will remain a key feature for some time,” said Neil Mackinnon, global strategist at VTB Capital.

If, and when, the Dubai concerns diminish, investors have a raft of economic news this week to digest, which could well be crucial in how markets end the year.

Earlier in Asia, nearly every market traded higher, with Japan's Nikkei 225 stock average climbing 264.03 points, or 2.9 percent, to 9,345.55. Hong Kong's Hang Seng added 687.00 points, or 3.3 percent, to 21,821.50 and South Korea's Kospi added 2 percent to 1,555.60. Both those markets tumbled nearly 5 percent on Friday.

Elsewhere, Shanghai's market climbed 3.2 percent, Australia's index was 2.8 percent higher and Taiwan's benchmark rose 1.2 percent.

Stocks in the UAE ended sharply lower though, with Abu Dhabi's main index down 8 percent and Dubai's closing more than 7 percent lower.

Elsewhere, oil prices steadied, with benchmark crude up 47 cents at $76.52 a barrel, while gold was steady at $1,174.30 an ounce.

The dollar fell 0.6 percent to 86.10 yen, while the euro was down 0.2 percent at $1.4982.

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