Global Market Wrap: European Markets Plunge 2% on Dubai World Debt Payment Delays

by: The LFB

Equity Futures: Dow -110.00. S&P -14.70. NASDAQ -19.00. Japanese Nikkei -60.00. German Dax -12.00.

European Trade: The trend this week in global equity trade has been one day up, the next one down, and following this pattern, the overnight markets have traded in the red, with the regional Asian and European indexes posting small declines. The same negative momentum has been seen in the U.S. futures market, which dropped a more than 1% during the Asian and the European trading hours.

European markets saw strong selling momentum near the opening bell, something that dragged the market down 2% in the first few hours of trade. Most of the selling came after Dubai World, the investment company run by the Dubai Government, said that it would have to delay its debt payments. At this moment, Dubai World has $59 billion in liabilities, and is an important stakeholder in a number of U.S. and European companies.

It is interesting that the major European indexes dropped 2% from the opening bell, since the global markets had barely moved ahead of the European futures market, and ahead of the U.S. Thanksgiving Holiday. Later in the day, the U.S. cash market will be closed, while on Friday, the NYSE’s Trading Floor will close at 1:00 p.m. EST.

TheLFB Charting Link

S&P Technical View: TheLFB Member Charts
4 Hour Chart Flows: Long Price Points: 1082, and 1112 Looking for: A break of 1112 or 1082 to signal mid-term sentiment

Momentum: S&P futures went into long mode on Nov. 13th and have easily held that trend, and that has allowed the tests of 4 hour chart support to be bought. There is a tight sideways channel forming and that is allowing the move from overbought to oversold and back again, to be completed over a 5 day period.

Elliott Wave: S&P 500 futures bounced lower after price action was unable to break through the 1112 resistance level over the past few days. Overall, the equity futures still look bullish, and are expected to make at least another push into recent highs over the mid-term, so long as the 1082 support area holds.

Traders will still be looking at the re-worked wave count of a black wave IV) which looks to be complete at the important 1082 support zone, and will be followed by a Long wave V) that may be in progress. Any break of the 1112 top will put a 1120 target in play, which should drive the majors even higher against the U.S. currency.

Sector Moves: The sectors with the largest weight were also the biggest decliners in Thursday’s European trade, after the news emerged that Dubai World is seeking to restructure its debt. The automobile, bank and basic resources companies plunged on average 3.5% in Thursday morning trade, while financials, insurers, real estate and travel & leisure companies plunged between 2% and 3%.

In the U.K. FTSE, only 4 companies out of the 100 members managed to hold in the green, while in the German Dax only Adidas (OTCQX:ADDYY) and Deutsche Telekom (DT) managed to advance, but the gains were very small.

The news that Dubai World would delay payments on its debt created a lot of uncertainty, since the company holds important stakes in critical European companies. The London Stock Exchange plunged 4.20%, Porsche tumbled 7%, while Daimler, the maker of Mercedes fell 4.5%. The Dubai Investment Authority holds an important stake in each of these companies.

Economic Moves: In the early European session, a report showed that euro area M3 Money Supply increased by 0.3% from one year ago. This is a massive decrease that adds to the M3 trend that has been in a downward spiral since early 2008, when it recorded a 12% expansion rate.

Ahead, the report calendar is clear due to the Thanksgiving Holiday. The U.S. equity trading floors will be closed today.

Crude oil
was recently trading at $76.90 per barrel, lower by $1.05

Gold was recently trading down by $5.10 to $1183.50.

Disclosure: No positions

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