Global Markets Rebounding after Friday's Drop

Monday stocks traded in a narrow range as they were steadying after Friday's steep drop.

Photo: Global Markets Rebounding after Friday's Drop

Investors set aside some of their worries about a possible debt crisis but shied away from big moves as they focused on consumers.

Global markets are rebounding after falling in response to news that Dubai World, the main investment arm of the Persian Gulf city-state, asked to defer payments on $60 billion in debt for six months.

Investors were initially anxious about the possibility that a debt default by Dubai could touch off a new round of lending problems even as credit markets are still recovering from last year's near-shutdown following the collapse of Lehman Brothers.

However, it appeared U.S. investors hold little of Dubai's debt, which has eased some concerns. The United Arab Emirates, where Dubai is located, also said Sunday it will make extra funding available to all banks in the country, including foreign banks with local offices, The Associated Press reports.

Meanwhile, analysts say European banks have more exposure than their U.S. counterparts. Asian stocks rallied sharply on Monday, while European markets were lower. Dubai's market, which was opened Monday for the first time since the debt deferment announcement, fell nearly 6 percent.

Rob Lutts, president and chief investment officer of Cabot Money Management, said that while some investments will be lost in Dubai, the global stock markets have now accounted for those potential losses.

"We've seen the impact," Lutts said, pointing to Friday's sharp declines. "I think that issue is known now."

Ahead of the opening bell, Dow Jones industrial average futures rose 15, or 0.2 percent, to 10,307. Standard & Poor's 500 index futures rose 2.40, or 0.2 percent, to 1,091.90, while Nasdaq 100 index futures gained 5.25, or 0.3 percent, to 1,764.50, The Associated Press reports.

In the meantime, Dubai's property market could plummet by up to 30 per cent from current levels - already down 50 per cent from peak - and may take more than a decade to recover, a senior real estate analyst warned this weekend, writes Abul Tahir.

His warning came as it was revealed that Dubai is in danger of defaulting on its debt of more than £48billion.

The main cause of the debt is Dubai World, the stateowned port operator and real estate holding company, believed to have liabilities exceeding £36billion.

Saud Masud, a real estate analyst for UBS based in Dubai, predicts property prices will fall by up to 30 per cent in the next few months.

He forecast the decline in a report which came out days before news of Dubai World's debt problems emerged, Daily Mail reports.