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December 15, 2009

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Dubai's news fuels markets worldwide

WORLD markets mostly rose yesterday after Dubai said it had received US$10 billion in emergency funds from its oil-rich neighbor Abu Dhabi, helping to ease investor fears that the emirate will default on its debt.

In Europe, the FTSE 100 index of leading British shares climbed 54.62 points, or 1 percent, at 5,316.19 while Germany's DAX rose 43.08 points, or 0.8 percent, to 5,799.37. The CAC-40 in France was 21.82 points, or 0.6 percent, higher at 3,825.54.

On Wall Street, the Dow Jones Industrial Average gained 29.70 points, or 0.3 percent, at 10,501.20 soon after the open while the broader Standard & Poor's 500 Index rose 5.36 points, or 0.5 percent, to 1,111.77.

Earlier in Asia, most stock markets rose after Dubai's announcement. Hong Kong's Hang Seng rose 183.64 points, or 0.8 percent, to 22,085.75.

The Dubai Financial Market's main index shot up 10.4 percent at the close. Abu Dhabi's stock market gained 7.9 percent.

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

The news cheered investors, who had feared the consequences of Dubai World defaulting. Since the state-owned company announced its intention last month to delay payment on its US$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.

"The first reaction has been to view this as a crisis averted, and 'risk friendly' trades are benefiting," said Kit Juckes, chief economist at ECU Group.

Underpinning the gains too has been solid United States 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 from recession. In tandem with recent jobs data, analysts said the outlook for the US economy has markedly improved, but that could mean the Federal Reserve brings forward its plan to withdraw extraordinary policy measures put in place to avert a total economic collapse.


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