Market Rumours

Repayment of a $4.1 billion (2.5 billion pound) bond issued by Dubai developer Nakheel was set to complete on Tuesday, when other Islamic bond issuers reassured investors in replies to a "soundness and health" check by Nasdaq Dubai. Government utility Dubai Electricity and Water Authority (DEWA) told bondholders it would make an interest payment on a $3.2 billion Islamic bond on December 16 as scheduled. However, Dubai's stock market .DFMGI, up 22 percent in recent sessions, fell 1.5 percent, with analysts saying worries over Dubai's debt position remained high on investors minds. But the cost of insuring Dubai's debt against restructuring or default was flat. Abu Dhabi threw debt-laden neighbour Dubai a $10 billion lifeline on Monday to head off a looming bond default by Nakheel, cheering Gulf and global markets on the day. DEWA made its announcement in response to questions from Nasdaq Dubai for information to determine the current value of securities listed on the bourse, in a move linked to Dubai World's $26 billion debt standstill request. Other Islamic bond issuers linked to Dubai's government, including DP World DPW.DI, Dubai Holding, Dubai Islamic Bank DISB.DU, and DIFC Investments, also responded to the request, with no surprises. Goldman Sachs analyst Ahmed Akarli said in a note the investment bank estimated Dubai World had $40 billion debt outstanding and other Dubai entities faced similar challenges "given the fact Dubai's total debt stocks stand close to $120 billion and at least $55 billion will be coming due ... within the next three years."

Japan's Nikkei stock average slipped 0.5 percent on Tuesday, with Canon Inc and other exporters hit by continued strength in the yen and as a general mood of caution spread before the Federal Reserve meets. But Mitsubishi UFJ Financial Group rose over 1 percent after Japan's largest bank on Monday priced a share sale at 428 yen to raise up to 1.03 trillion yen ($11.6 billion) to help meet stricter global capital requirements, and other banks gained as well. The Federal Reserve starts its two-day meeting on Tuesday and is likely to keep rates unchanged near zero. But all eyes are on the accompanying statement, especially after upbeat sales and jobs data led markets to price in the chance of a rate hike in the middle of 2010. "There's some caution ahead of the Fed meeting. I don't think they'll raise rates, but depending on their comments the dollar could fall, and this is making investors in the stock market nervous as well," said Hideyuki Ishiguro, a strategist at Okasan Securities.