fridays trading, page-38

Hi Peter:

Here's Mike Shedlock's take on thing, and the safe haven looks like German Bonds.

"Global stock markets endured heavy selling on Thursday as investors were spooked by the spectre of a default by Dubai and after a febrile foreign exchange market saw the yen surge to a 14-year high against the dollar.

"The turmoil caused a flight to less risky assets. Gold, which had challenged $1,200 in Asian trading, fell back from its highs and money flowed into havens such as German government bonds.

"US markets are closed for the Thanksgiving holiday, but electronic trading of the benchmark S&P 500 equity futures contract showed a potential drop on Wall Street of 2.2 per cent.

"As the European trading day progressed it became clear it was Dubai World’s difficulties that had hit a particular nerve, reminding investors of the lingering damage wrought by the financial crisis.

"Banking stocks tumbled on concern about their potential exposure to Dubai. Indeed, the cost of insuring against default by the emirate jumped, with Reuters reporting the Dubai five-year credit default swap being quoted as high as 500-550 basis points. This means it would cost about $500,000 a year to insure $10m of Dubai’s debt. On Tuesday it would have cost about $360,000.

"Greek and Irish government five-year credit default swaps also moved higher as nations with supposedly precarious fiscal positions were punished. In contrast, investors sought out comparative haven assets, pushing the yield on the German Bund down by 8 basis points to 3.16 per cent."

In the late 90's we had the "Asian Contagion". Could be, in the late noughties we'll have the "Middle East Contagion".

Still - it's early days yet.

Cheers
Red