Dubai Financial Market up 2.7% on New Year optimism dismissing fears about UAE Central Bank credit squeezePosted on 03 January 2013 with no comments from readers
Dubai Financial Market cast worries about a New Year credit squeeze on UAE home loan-to-value ratios and surged 2.7 per cent on the first trading day of 2013. This advance came before a similar jump in share prices on Wall Street as the US finally inked a deal to avoid the fiscal cliff of higher taxation and spending cuts.
Some Wall Street traders immediately warned that this is the top of the recent rally and not the start of a major advance in share prices. Others reckoned a combination of low interest rates and a Fed commitment to devalue the dollar set the Dow Jones up for a massive spike to 20,000.
Seldom have the bulls and bears been so wide apart. Of course both could be right if stocks surge ahead for a few months and then suffer a massive crash. That would also be consistent with the warnings about money printing and unstable financial markets.
Bears argue that if you look around the world in 2013 there are few reasons to be cheerful. There are monstrous debts everywhere. The eurozone, the world’s largest economic bloc is in recession. The German chancellor is warning of a worse, not better year than 2012. Japan is facing an even more dire economic situation about to be made worse by a surge in the yen.
Things are fine in the Oil States but for reasons that usually mean a recession in the developing economies, high oil prices. China is showing some modest signs of growth after a huge stimulus for the leadership change last October but this could easily be transient.
Recent US economic data is being hyped up out of all proportion by Wall Street propagandists and financial TV. Gains in manufacturing are tiny and offset by very mixed reports from the all important housing sector, where only housing stocks show a strong recovery.
Claims of a US economic recovery powering ahead are complete hot air and the room for a sudden shock to stock market expectations is enormous. What we see is an economy recovering very slowly on massive government borrowing. US debt is not leveraging a recovery, it is the other way around. The bigger debt is the only recovery.
Will markets go very much higher before reality comes back into focus? Possibly but investors should prepare for very high volatility at any moment.