Europe rescue package triggers market rally

Dubai: Regional stock and bond markets recovered sharply as global markets and crude oil prices rallied on the back of the $1 trillion rescue package for the debt-afflicted euro zone.

Abu Dhabi's ADX General Index and Dubai's DFM General Index climbed 1.5 per cent and 1.6 per cent, respectively.

UAE Central Bank Governor Sultan Bin Nasser Al Suwaidi said he does not expect the financial crisis in Europe to affect UAE banks as they have "no significant" exposure to the Greek debt.

The EU rescue plan consists of government-backed loan guarantees and bilateral loans worth up to $570 billion (about Dh2,093 billion) provided by euro zone members.

Under the three-year plan, the European Commission will make $75 billion (about Dh275 billion) available while countries from the 16-nation euro zone would promise backing for $570 billion (about Dh2,093 billion). The IMF would contribute an additional sum of at least half of the EU's total contribution, or $250 billion (about Dh918 billion).

Analysts said the EU package has reduced the uncertainty in the credit and equity markets and boosted crude oil prices due to a substantial decline in risk perception.

"The European debt deal had a clear positive impact on the local market sentiment, but the intermittent profit-taking limited gains on the DFM," said Shiv Prakash, an analyst with Mac Sharaf Securities.

Other regional market indices such as Kuwait Stock Exchange Index (1.7 per cent) and Qatar's QE Index (3.7 per cent) and Saudi Arabia's Tadawul Index (1.3 per cent) posted gains. Oil prices rallied to more than $77.60.

Risk appetite

"Recovery across debt and equity markets has been visible across regional markets yesterday. For the global debt markets, the crisis has been a systemic shock and the bailout package is expected to improve the investor risk appetite and debt-pricing," said Mohieddine Kronfol, Managing Director of Asset Management of Algebra Capital, a regional investment bank.

The euro rallied close to $1.30 (about Dh4.77) and European shares shot up by nearly five per cent. Across Asia stocks rose for the first time in a week. In the US, the Dow Jones Index and Nasdaq Composite Index gained more than three per cent as the markets opened for trading yesterday.