Replies to post #307069 on $Stock*Shop*Charts*News*Option$

[Stock Lobster]

BL: Dubai Default Swaps Rise to Highest Since Debt Delay (Update1)

By Laura Cochrane

Feb. 12 (Bloomberg) -- The cost to protect against a default by Dubai rose to the highest level since state- controlled holding company Dubai World said in November it wanted to delay debt repayments.

Credit-default swaps linked to Dubai debt jumped the most in two months to 638 basis points today from 585 basis points yesterday, the highest since Nov. 27, two days after the company said it wanted to postpone payments, according to CMA Datavision at 2:15 p.m. in London. Dubai’s Islamic bond due 2014 fell to 87.125 cents on the dollar from 89 cents, the lowest since the debt was sold in October, according to Royal Bank of Scotland Group Plc prices.

Dubai World, developer of the world’s tallest tower, said in November it wanted a standstill agreement from creditors so that it could restructure $22 billion of debt. The announcement shook investor confidence around the world and sent Dubai default swaps, which rise as perceptions of credit quality deteriorate, to as high as 647 basis points.

Abu Dhabi’s government provided $10 billion for Dubai’s financial support fund on Dec. 14 to help repay obligations, including the $4.1 billion needed for payments on the Islamic bond of Nakheel PJSC. Dubai World has yet to present an offer to lenders or say when a deal may be struck.

Credit default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A basis point is 0.01 percentage point and is equivalent to $1,000 a year on a contract protecting $10 million of debt.

To contact the reporter responsible for this story: Laura Cochrane at [e-mail]

Last Updated: February 12, 2010 10:13 EST

[Tuff-Stuff]

EDC EDZ FXE FXP VIX SPY Currency, emerging markets ETFs make big moves
Investors dump developing markets stocks, euro amid flight from risk assets

China again raising bank-reserve requirements to cool growth and uncertain news from the euro zone resulted in across-the-board selling in global markets Friday, and the damage was particularly evident in exchange-traded funds tracking currencies and emerging markets stocks.

The Direxion Daily Emerging Markets Bull 3x Shares /quotes/comstock/13*!edc/quotes/nls/edc (EDC 101.26, -5.86, -5.47%) was the top percentage decliner in ETFs early Friday, losing more than 5%.

There is a growing array of exchange-traded products that let traders play daily swings in the market with leverage. These high-octane portfolios are very different from other ETFs more suited to buy-and-hold investors.

basis. For example, the Direxion Daily Emerging Markets Bear 3x Shares /quotes/comstock/13*!edz/quotes/nls/edz (EDZ 6.02, +0.35, +6.17%) was the biggest gainer in ETFs early Friday.

China's central bank announced Friday it was increasing the percentage of deposits banks need to keep as reserves. See full story on China's surprise move.

Meanwhile, an ETF tracking the euro continued its decline Friday as investors looked for details on how Greece's debt problems will be resolved. Also moving markets was a report that economic growth in the euro zone stalled in the fourth quarter. See Economic Report on euro zone GDP.

The CurrencyShares Euro Trust /quotes/comstock/13*!fxe/quotes/nls/fxe (FXE 135.95, -0.64, -0.47%) was down about 0.5% in recent trading. Heading into Thursday, the currency ETF was off nearly 10% from its 52-week high. An equity fund, Vanguard European ETF /quotes/comstock/13*!vgk/quotes/nls/vgk (VGK 44.12, -0.91, -2.02%) , slipped 2%.

Stock ETFs tracking China and other emerging markets were among the hardest hit Friday in that category.

The ProShares UltraShort FTSE/Xinhua China 25 /quotes/comstock/13*!fxp/quotes/nls/fxp (FXP 9.58, +0.49, +5.39%) , a 200% leveraged bearish ETF, gained nearly 6%.

The largest ETF by assets, SPDR S&P 500 ETF /quotes/comstock/13*!spy/quotes/nls/spy (SPY 106.91, -1.22, -1.13%) , lost 1% and the Dow Jones Industrial Average /quotes/comstock/10w!i:dji/delayed (INDU 10,019, -125.31, -1.24%) was down more than 100 points as the selling spread to U.S. stocks.

Commodity ETFs also lost ground Friday. U.S. Oil Fund /quotes/comstock/13*!uso/quotes/nls/uso (USO 35.82, -0.96, -2.61%) dropped 2% while SPDR Gold Shares /quotes/comstock/13*!gld/quotes/nls/gld (GLD 106.48, -0.65, -0.61%) slipped less than 1%.

An exchange-traded note tracking futures based on the market's "fear gauge" jumped Friday. The iPath S&P 500 VIX Short-Term Futures ETN /quotes/comstock/13*!vxx/quotes/nls/vxx (VXX 32.18, +0.78, +2.48%) added almost 3% at last check.

John Spence is a reporter for MarketWatch in Boston.