Most Madoff Victims Denied SIPC Repayments a Year After Arrest

By Erik Larson

Dec. 11 (Bloomberg) -- Most of the people who say they lost money with Bernard Madoff have had their claims denied because they invested with the con man indirectly or withdrew more money than they put in.

Trustee Irving Picard has turned down about 9,900 of the 11,500 people whose claims he has analyzed, with another 4,500 cases still to be looked into. The 1,600 people whose claims he has approved have losses totaling $4.69 billion, though they’ll get at most $500,000 to begin with, pending the results of Picard’s suits against people he regards as beneficiaries of the biggest Ponzi scheme in history.

One year after Madoff’s arrest in his penthouse apartment in Manhattan on Dec. 11, 2008, exposing the swindle that ruined thousands of investors, the denial of most claims and the approval of some at lesser amounts than victims sought has emerged as the biggest dispute in the case. Many alleged victims argue they should be paid years’ worth of fake profit.

While Picard said yesterday he’s processing claims as quickly as possible, he declined to estimate when he’ll finish.

“Getting visibility into older account records has unfortunately been a slow process,” Picard said in an e-mail. “We are making progress and issuing new determinations regularly.”

Picard’s method for determining claims is “grossly unfair,” retiree Ken Macher, who claims he lost a savings account once worth $1.6 million, said in a Dec. 7 filing in U.S. Bankruptcy Court in New York. Picard is depriving Macher of “some small relief from the loss of our entire investment,” he said.

Macher’s claim was denied because he withdrew $1 million in 2007 after having invested only about $365,500, according to the filing. Macher, of Fairfax, California, said the funds were immediately placed in another Madoff account that was wiped out.

Reality

“We never received any of the money,” said Macher, who said in his filing he took a consulting job to help save his home. “Equating this transaction with a withdrawal in which the investor actually received the funds ignores the reality of the circumstances.” A call to the phone number listed for Macher’s address in Fairfax wasn’t returned.

Picard is calculating claims based on cash deposits minus withdrawals.

Helen Chaitman, who testified Dec. 9 in Washington at a congressional subcommittee hearing about the case, said the liquidation is taking too long because Picard didn’t set claims based on Madoff’s last account statements.

“He’s violating a federal statute which mandates that customers be paid based on their last statements,” Chaitman said yesterday in a phone interview. “He’s going through decades’ worth of records in order to disqualify eligible investors.”

February Hearing

U.S. Bankruptcy Judge Burton Lifland will consider the disagreement at a Feb. 2 hearing in New York.

Picard, hired by the government-chartered Securities Investor Protection Corp., said yesterday that cash losses were about $19.4 billion, while victims thought they had $65 billion based on profit from securities that Madoff didn’t actually purchase. Picard previously estimated that cash losses were $21 billion and said yesterday that his new figure may change as the investigation continues.

SIPC will pay about $561 million for the investors’ claims, money it has raised through fees charged to its 5,227 brokerage firm members. Investor claims that exceed $500,000 will get a share of what Picard recovers in lawsuits seeking about $15 billion in fake profit to be distributed to victims.

Feeder Funds

Out of 11,500 determined so far, Picard denied about 9,900, mostly because they invested indirectly through so-called feeder funds.

Picard has said the victims who invested indirectly through so-called feeder funds may still get some cash if claims by the funds are approved and those funds use the money to repay customers. Some feeder funds have also had claims denied.

“Most of the feeder funds deposited more money than they received back,” Picard said in yesterday’s e-mail. “Thus, they should have allowed claims and receive payments.”

Billions of dollars in investor cash were funneled into the fraud by funds including those run by New York-based Fairfield Greenwich Group, investment manager J. Ezra Merkin’s Gabriel Capital Corp., Spanish lender Banco Santander SA and Bermuda- based Kingate Management Ltd., among others. Many of the funds were sued by Picard for the return of profit from the fraud.

Madoff, 71, pleaded guilty in March and is serving a 150- year sentence at a federal prison in Butner, North Carolina.

The case is Securities Investor Protection Corp. v. Bernard L. Madoff Investment Securities LLC, 08-01789, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Finding Hope in Troubled Times

 

Investment	Debt
Money	Loan
Insurance	Economic

By John Baldoni

I've heard executives say that they have never seen things as bad as they are now. Even as the economy shows signs of recovery, it is by no means certain that recovery will be a linear process.

In these troubled times, it is useful to recall examples of leaders who have survived adversity. One of my favorites, and one whom I have written about extensively, is Winston Churchill. For our times the Churchill most apt is not the Prime Minister of 1940 who rallied Britain as the sole force against the Nazis. Rather it is the Churchill of 1915, tossed from the cabinet after the debacle of Dardanelles, an ill-fated plan to knock Turkey out of the Great War.

As we learn in Paul Johnson's splendid new biography, Churchill at age 40 found himself very much alone and reviled. So what did he do? He "brooded" for a bit; his wife Clementine said "I thought he would die of grief." But then to his great delight, Churchill found a new hobby — painting. And through his art, for which he exhibited great talent, he reconnected himself. Rejuvenated, he enlisted in the Army and served on the Front in France for six months of 1915-16. Later Churchill re-entered politics, and from there continued his public life.

The Churchill of this period teaches us that we can recover from our mistakes if we do two things: one, recharge; two, act. The latter is familiar to any executive but action after adversity should be preceded by a period of reflection as well as rejuvenation. Here are three ways to make this happen.

Reflect. Take a step back, consider what happened, and examine the situation from all angles. Discuss with colleagues what went right as well as wrong. Assess your performance and consider what you might have done differently. Now that you know the outcome, use what you know to prepare for the future.

Recharge. Now, put the failure aside and find ways to reconnect with yourself. It may be through a regime of fitness or by spending more time with friends and family. Keep yourself occupied; do not dwell on yourself. Churchill painted. What might you do? Find something to reconnect your mind with your spirit. You may have lost a battle, but you did not lose your life. Keep thinking positively.

(Re)Act. You must do something. If you are in the same job, put lessons learned from failure into place. Debrief your team. If you are in a new job, then find ways to leverage those bitter lessons in your new position. Know that you are a different person, in many ways a stronger one for having withstood the pressures of defeat. Channel your energies into your work, but keep in tune with yourself and people close to you.

Churchill did have one luxury that business leaders may not have: time. He could retire from public life. Leaders on the job now have no such time. Yet no matter how tough things are, every leader can and should make some time for self, especially in the wake of defeat. Failure to do so may pre-destine future failure.

Understand that defeat is not the end. The Churchill of 1915 prepared the way for the Churchill of 1940 to become the savior of his nation. "A pessimist sees the difficulty in every opportunity," Churchill once quipped. "An optimist sees the opportunity in every difficulty."

Yen, Dollar Rise on Rate Outlook, Gold Falls Most in 14 Months

Dec. 7 (Bloomberg) -- The yen strengthened and the dollar rose to its highest level in a month against the euro as investors weighed whether the world economy is recovering fast enough to warrant higher central bank interest rates. Gold headed for the steepest two-day retreat since October 2008.

The yen advanced against all 16 most-traded currencies tracked by Bloomberg at 12:13 p.m. in New York. The dollar gained versus 12. The MSCI Emerging Markets Index dropped for a second straight day as Dubai’s equity index plunged 5.8 percent to a four-month low. Gold fell 1.9 percent in New York, while crude oil dropped a fourth consecutive day. European equities fell, while the Standard & Poor’s 500 Index rallied.

Federal Reserve Chairman Ben Bernanke speaks today for the first time since the Dec. 4 U.S. employment report signaled a surprise drop in the jobless rate, stoking expectations the Fed may raise rates sooner than economists had anticipated. Investors are concerned banks may have to increase writedowns that have reached $1.7 trillion worldwide since the credit crunch began, as Dubai World seeks to delay payment on $26 billion of debt.

“Not only are commodities falling because of strength in the dollar, traders and investors are easing up on their inflation fears and on their hedges on the U.S. dollar,” said Kathy Lien, New York-based director of currency research with online currency trader GFT Forex. “One of the primary reasons why traders or investors have piled into gold is because of the belief that the Federal Reserve is going to be behind the curve on tightening monetary policy.”

Yen, Dollar Gain

The yen rose most against higher-yielding currencies, advancing 1.8 percent versus the New Zealand dollar. The U.S. dollar traded at its highest level since Nov. 4 versus the euro, extending gains made at the end of last week that followed the U.S. employment report.

Treasury two-year notes advanced on speculation Bernanke may try to damp optimism about the strength of the economic recovery in his speech today. The benchmark two-year note yield fell four basis points to 0.80 percent.

The U.S. lost 11,000 jobs in November, less than the 125,000 median forecast of 82 economists in a Bloomberg survey, the Labor Department said Dec. 4. Fed-funds futures contracts on the Chicago Board of Trade showed today a 16 percent probability the central bank will increase its benchmark overnight rate to at least 0.5 percent by March, up from 11 percent a week ago.

Gold futures for February delivery in New York extended their decline since Dec. 3 to 5.8 percent, falling to $1,147.90 an ounce as the Dollar Index’s advance curbed the metal’s appear as an alternative asset.

Four-Day Retreat

Crude oil futures slumped 1.5 percent and have now lost 5.2 percent since Dec. 1. The Reuters/Jefferies CRB Index of commodities declined for a fourth day, the longest losing streak since August.

The Dubai Financial Market General Index sank the most among benchmark equity indexes worldwide. The measure has tumbled 17 percent since Dubai announced on Nov. 25 that state- owned Dubai World would ask creditors for a “standstill” agreement on its debt, including property company Nakheel PJSC’s $3.5 billion bond due for repayment in a week.

Russia’s Micex Index dropped 1.5 percent as oil company OAO Rosneft sank on falling crude prices. South Africa’s FTSE/JSE Africa All Shares Index declined 0.9 percent, after gold producer AngloGold Ashanti Ltd. retreated 3.7 percent.

Europe, U.S. Stocks

The Dow Jones Stoxx 600 Index, the benchmark for European stocks, slumped 0.5 percent. Fresnillo Plc, the world’s largest primary silver producer, led basic-resources producers lower in London, losing 1.89 percent. Siemens AG, Europe’s biggest engineering company, slipped 1.6 percent in Frankfurt after Morgan Stanley cut its recommendation.

The S&P 500 rose 0.1 percent, adding to last week’s 1.3 percent advance. Cigna Corp. added 4.5 percent, leading gains among health-care companies, after Goldman Sachs lifted its industry rating to “attractive,” citing cheap shares and “limited downside risk under likely outcomes for health reform legislation.”

Dubai Concerns Eased, Wall St. Moves Up

tocks were higher on Tuesday as jitters over the debt crisis in Dubai eased and reports showed signs of stability in three cornerstones of the economy: housing, manufacturing and construction.

Uncertainty pervaded the markets in recent days, as investors tried to assess whether the inability of a Dubai investment fund to keep up with $59 billion in debt payments would rattle banks and other emerging economies.

But on Tuesday, investors across the world seemed more confident that the crisis was contained. A pledge by Dubai World, the emirate’s investment vehicle, to restructure its debt helped calm investors even though the company said late Monday that it was seeking to renegotiate only the $26 billion in obligations held by its troubled real estate developer, Nakheel.

“It’s a huge sigh of anticipatory relief that Dubai is not going to blow up in the global investor’s face,” said M. Jake Dollarhide, chief executive of Longbow Asset Management in Tulsa, Okla. “What this market needs is to be able to trust the worldwide comeback and to know that worldwide economies are going to hold strong.”

The Dow Jones industrial average rose 126.74 points, or 1.23 percent, to 10,471.58 — a 14-month high. The Standard & Poor’s 500-stock index jumped 13.23 points, or 1.21 percent, to 1,108.86, also to a 14-month high.

The Nasdaq composite index gained 31.21 points, or 1.46 percent, to 2,175.81. The increases were broad-based, led by shares of utility and telecommunication companies.

Shares of Comcast, the nation’s largest cable operator, rose 2.1 percent after reports said General Electric had reached a tentative deal that would clear the way for the sale of NBC Universal to Comcast. Shares of G.E. gained 0.94 percent.

In addition to the Dubai news, investors took in three reports on Tuesday that, while not glowing, largely beat expectations and added optimism to the forecast for an economic rebound.

An index on tentative home sales compiled by the National Association of Realtors reached its highest level in three years in October, aided by the allure of a government-financed credit of up to $8,000 for first-time home buyers.

A separate barometer on manufacturing activity, from the Institute for Supply Management, showed a slight drop in the pace of expansion in November, falling short of Wall Street’s expectations. The report, however, recorded an increase in new factory orders in November, suggesting growth.

Finally, the Commerce Department said construction spending remained flat in October, at $910.77 billion, as a rise in residential spending helped offset losses in commercial spending. Excluding residential improvements, which are difficult to estimate, spending fell 1.1 percent. The government also revised its September data, recording a 1.6 percent decrease rather than a 0.8 percent increase in construction spending.

Hank B. Smith, chief investment officer for Haverford Investments, said that while the economic reports, taken together, did not show great gains, they reassured investors. “All recoveries go in fits and starts,” he said. “If you look at the reports as a whole, clearly we are recovering.”

Commodities posted gains on Tuesday. Gold shot past $1,200 an ounce for the first time, but then retreated slightly, ending the day at $1,197 an ounce. Crude oil prices rose $1.09, to $78.37 a barrel.

The dollar continued to weaken, trading at $1.51 against the euro.

The Treasury’s benchmark 10-year note fell 23/32, to 100 25/32, and the yield rose to 3.27 percent from 3.20 percent late Monday.

Later this week, investors will examine two crucial snapshots of the health of the economy. On Thursday, retailers will report November sales figures, giving a sense of the strength of holiday sales. On Friday, the Labor Department will release its monthly unemployment report.

Following are the results of Tuesday’s auction of four-week notes:

Dubai Credit Risk Falls Most in 9 Months on $26 Billion Workout

Dec. 2 (Bloomberg) -- Dubai’s credit risk fell the most in nine months after state-controlled Dubai World began talks on restructuring less than half its total liabilities and said the rest of its obligations are on “a stable financial footing.”

The cost to protect against a default by Dubai dropped 113 basis points to 457 yesterday, the biggest one-day decline since Feb. 23, according to credit-default swap prices from CMA Datavision. Debt from Dubai World subsidiaries including Infinity World Holding, Istithmar World and Ports & Free Zone World aren’t part of restructuring negotiations, the company said in a statement on Nov. 30.

Dubai World is seeking to delay payments on less than half its $59 billion of liabilities, easing the potential damage to banks recovering from $1.7 trillion of losses and writedowns from the global crisis. Shares worldwide recovered some of the losses suffered since Dubai announced it would seek a “standstill” agreement on all of Dubai World’s debt as the MSCI World Index gained 2 percent yesterday, the most in three weeks.

“Now that they’re saying $26 billion, it reduces some of the panic that built up in the last few days,” said Nick Chamie, an analyst at RBC Capital Markets in Toronto. “This is positive. The market was feeding on its own concern and there were talks of $60 billion debt that would need to be restructured.”

A creditor group including HSBC Holdings Plc, Standard Chartered Plc, Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc has formed a steering committee and will meet with representatives of Dubai World on Sunday or Monday, the Financial Times reported yesterday, citing a person familiar with the matter.

‘Minor Problem’

Dubai’s ruler and United Arab Emirates Prime Minister Sheikh Mohammed Bin RashidAl Maktoum said the world misunderstood the government’s intention when it said state-run holding company Dubai World would renegotiate debt repayments, according to Al Arabiya television yesterday.

The debt Dubai World plans to restructure includes about $6 billion of Islamic bonds sold by Nakheel, according to the Dubai World statement.

“Initial discussions have commenced with the banks of Dubai World and are proceeding on a constructive basis,” Dubai World said in the statement. “It is envisaged the restructuring process will be carried out in an equitable way for the overall benefit of all stakeholders.”

EM Bond Rally

Debt and shares worldwide have been rebounding after Europe suffered its biggest one-day stock market slump since April last week on investor concern Dubai’s debt delay might cause the biggest emerging-market default since Argentina in 2001. The MSCI Emerging Market Index of stocks climbed 2.1 percent, the most since Nov. 9, to 973.31 yesterday.

The extra yield investors demand to own emerging-market bonds instead of U.S. Treasuries declined 14 basis points to 3.15 percentage points yesterday, according to JPMorgan Chase & Co.’s EMBI+ Index. Lebanon sold $500 million of bonds in overseas credit markets yesterday.

The $26 billion figure “confirms that it’s a relatively minor problem,” said Michael Atkin, who helps oversee $10 billion in fixed-income assets as head of sovereign research at Putnam Investments in Boston. Dubai’s struggles serve as a “reminder that we’re not yet out of the woods in the global financial system. It raises the issue of what else is out there,” he said.

Royal Bank of Scotland was the biggest underwriter of Dubai World loans while HSBC has the most at risk in the U.A.E., according to JPMorgan Chase & Co. Spokespeople for RBS and HSBC declined to comment.

Moody’s

Banks have begun negotiating with Dubai World because they “are wary of any alternative including calling Dubai World in default,” said Hani Sabra, an associate covering the Middle East for New York-based research firm Eurasia Group.

Total government and government-related debt in Dubai could be about $100 billion, including an estimated $34.22 billion at Dubai World and its units, Moody’s Investors Service said in an e-mailed report yesterday. The rating assessor said it expects no material loss at any of the international banks exposed to Dubai World.

“The only consequence that we expect to result from this event is a change in investors’ perception of the risks associated to Dubai and the United Arab Emirates, and a re- pricing of risks and opportunities,” Moody’s said in the statement. Dubai’s corporate landscape is now effectively a high-yield market, Moody’s added.

Default Swaps

The United Arab Emirates’ central bank said Nov. 29 it “stands behind” the country’s local and foreign banks and offered them access to more money under a new facility. U.A.E. Central Bank Governor Sultan Al-Suwaidi told Abu Dhabi TV on Nov. 30 there was “no need to worry” about lenders in the Persian Gulf nation.

Default swaps for Abu Dhabi narrowed 15 basis points to 129 and contracts linked to DP World Ltd. dropped 113 to 519 yesterday.

The contracts, which fall as perceptions of credit quality improve, 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.

Shares in the emirates fell, with Abu Dhabi’s measure wiping out its gains since May in a record 12 percent two-day slump. The Dubai Financial Market index declined 5.6 percent. Qatar’s DSM20 Index lost 8.3 percent in its first trading day since the Nov. 25 restructuring announcement.

Support Fund

The Dubai government said Nov. 25 its Financial Support Fund will spearhead the workout for Dubai World and named Aidan Birkett of Deloitte LLP as its chief restructuring officer. The government said Dubai World would seek an extension of loan maturities until at least May 30, 2010.

Bondholders of Nakheel PJSC, whose Islamic bond is due Dec. 14, have formed a creditor group that represents more than 25 percent of the debt, said Jo Shepherd, head of public relations at Ashurst LLC, which was appointed legal adviser. The group is considering its options, Shepherd said in an interview on Nov. 30. More than 75 percent consent from creditors is needed to approve extraordinary resolutions.

The Nakheel 3.17 percent bonds, known as sukuk, fell to 55 cents on the dollar from 58, according to Citigroup Inc. prices on Bloomberg. The bonds, governed by Shariah laws barring investors from profiting from the exchange of money, traded for 110.5 cents on Nov. 23 and as low as 42 cents on the dollar Nov. 27.

Creditor Incentive

“Even though it is going to be tough to restructure $26 billion of debt, Dubai World’s creditors have an incentive to do so in order to reduce the haircut that they will have to take,” said Rachel Ziemba, a senior analyst covering sovereign wealth funds at Roubini Global Economics, a New York-based research firm. “Time is short but they might still avoid defaulting on Nakheel’s $3.5 billion bonds due on Dec. 14.”

Dubai’s government told creditors of Dubai World on Nov. 30 that they should help in a restructuring the holding company because it hasn’t guaranteed the debt.

“The lenders should bear part of the responsibility,” the director general of the emirate’s finance department, Abdulrahman Al Saleh, said on state-run Dubai TV. The government’s Nov. 25 decision to seek a halt on Dubai World’s debt payments is “in the interest of all parties, the investors the creditors and the contractors,” he said.

Housing Slump

Dubai, the second-biggest of seven emirates that make up the U.A.E., and its state-owned companies borrowed $80 billion to fund a boom in growth and diversify the economy. The global financial turmoil and a decline in property prices hurt companies such as Dubai World as they struggled to raise loans.

The company received financing based on the “viability of its projects, not on government guarantees,” Al Saleh said.

Home prices in Dubai plummeted 47 percent in the second quarter from a year ago, the steepest drop of any market, according to Knight Frank LLC. Property prices may slide further, a survey by Colliers International showed Oct. 14.

Istithmar World, Dubai World’s investment unit, bought New York luxury retailer Barneys in 2007 for $942.3 million. Dubai World agreed in 2008 to invest about $5.1 billion in U.S. casino company MGM Mirage as part of a plan to diversify the emirate’s economy into entertainment and financial services.

Infinity World is a special purpose vehicle to buy Dubai World’s stake in U.S. casino company MGM Mirage in 2007. Ports & Free Zone World owns DP World Ltd., Economic Zones World, P&O Ferries and Jebel Ali Free Zone.

Dubai, home to the world’s tallest tower, set up a $20 billion Dubai Financial Support Fund after the seizure in credit markets. Dubai said Nov. 25 it borrowed $5 billion from Abu Dhabi government-controlled banks for the fund, after raising $10 billion by selling bonds to the U.A.E. central bank in February.

$5 Billion Borrowed

Dubai’s government raised $1.93 billion in October from the biggest sale of Islamic bonds from the Gulf Arab region this year, and paid off a $1 billion Dubai Civil Aviation Authority sukuk due Nov. 4. The sheikhdom and its state-owned companies have to repay $9.2 billion of bonds and loans maturing in 2010, $19.8 billion in 2011 and $17.3 billion in the following year, Deutsche Bank AG said in report in August.

Istithmar World breached covenants on two loans backed by London’s Adelphi office building on Oct. 19, the issuer said in a statement on Nov. 30.

Moody’s and Standard & Poor’s cut their ratings on Dubai state companies, saying they may consider Dubai World’s plan to delay payments a default.

“The times of implicit support are clearly over,” said Philipp Lotter, vice-president of Moody’s Investors Service in Dubai. “In the past, entities such as Dubai World certainly represented themselves as quasi-government entities, whereas there was no legal obligation on behalf of the government to support, and that has certainly shifted with last week’s announcement.”

Tags: Dubai,dubai

Stocks, Commodities Rise on Dubai, China; Dollar Weakens

Dec. 1 (Bloomberg) -- Stocks rallied from Shanghai to New York and the dollar slid as Dubai World began talks to restructure less than half its debt and Chinese manufacturing grew at the fastest pace in five years. Treasury 10-year notes dropped for the first time in six days.

The Standard & Poor’s 500 Index added 1.2 percent to 1,108.86 at 4:09 p.m. in New York. Europe’s Dow Jones Stoxx 600 Index jumped 2.7 percent, the most since July. The dollar weakened against 14 of the 16 most-traded currencies, gold rose to a record and oil climbed 1.4 percent. Aluminum, copper, lead and zinc led gains in industrial metals.

Dubai is in talks with its lenders to restructure $26 billion of debt, easing concern that a default would add to the $1.7 trillion that financial companies around the world have written down because of the credit crisis. An HSBC Holdings Plc index showed China’s manufacturing increased last month, while the Institute for Supply Management said U.S. manufacturing expanded in November for a fourth consecutive month.

“The scare with Dubai World is dissipating, it’s a faded memory at this point,” said Scott Richter, who helps oversee $18.6 billion at Fifth Third Asset Management in Cleveland. “The fact that they’re trying to restructure the debt and the central banks in the region are providing liquidity implies that it’s a more contained issue and it’s not going to blow up into another systemic Lehman Brothers. Or at least that’s the hope.”

Commodity Producers Rally

The Dow Jones Industrial Average increased 126.74 points, or 1.2 percent, to a 14-month high of 10,471.58. Caterpillar Inc., the largest maker of earth-moving equipment, and Home Depot Inc., the biggest home-improvement retailer, jumped at least 2.2 percent after the number of contracts to buy previously owned U.S. homes unexpectedly rose 3.7 percent in October, according to the National Association of Realtors.

Commodity producers, real-estate and media companies led gains in Europe as all 19 industry groups in the Stoxx 600 advanced at least 1.7 percent. HSBC Holdings, the region’s largest bank, added 2.7 percent in London as concern eased that losses from a possible default by Dubai World will spread. BHP Billiton Ltd. led basic-resources companies higher, gaining 3.5 percent.

The MSCI Asia Pacific Index jumped 1.5 percent. Nissan Motor Co., which gets 35 percent of its revenue from North America, added 3 percent in Tokyo as the yen slumped against the dollar. Baoshan Iron & Steel Co. surged 7.8 percent in Shanghai on speculation steel demand in China will increase.

The Shanghai Stock Exchange Composite Index added 1.3 percent and extended its two-day gain to 4.5 percent, the biggest since October.

‘Following on the Upside’

“When China is going up, the U.S., Europe and the U.K. are following on the upside,” said Louis de Fels, a Paris-based money manager at Raymond James Asset Management International, which oversees $29 billion. “We can see that what’s happening in Dubai was not a huge factor for the market, because we just went down for one day.”

Dubai’s announcement Nov. 25 that it would seek to delay debt repayments stoked concern that a potential default would set back the global financial system’s recovery from the recession. It triggered the biggest stock market slump in three months in Asia and Europe’s worst rout since April as the debt request risked adding to banks’ losses.

Qatar’s benchmark equity index fell 8.3 percent on the nation’s first trading day since Dubai’s announcement, leading declines across the Persian Gulf. The Dubai Financial Market General Index sank for a second day, dropping 5.6 percent to the lowest level since August.

Treasuries Drop

Treasuries declined as demand for the relative safety of U.S. government debt decreased. The yield on the 10-year Treasury note rose seven basis points to 3.27 percent.

The extra yield investors demand to own emerging-market debt over U.S. treasuries fell 14 basis points to 3.16 percentage points, according to JPMorgan Chase & Co.’s EMBI+ Index. The MSCI Emerging Markets Index of equities climbed 2.3 percent, the most since Nov. 9.

Dubai’s credit risk fell the most in nine months. The cost to protect against a default by Dubai dropped 113 basis points to 457, the biggest one-day decline since Feb. 23, according to credit-default swap prices from CMA Datavision.

Crude oil for January delivery gained $1.09 to $78.37 a barrel in New York. Natural gas fell 1.8 percent to $4.762 per million British thermal units on forecasts for milder weather later this month.

Copper advanced 1.7 percent to $3.231 a pound in New York, while lead, zinc and aluminum also rallied. Gold rose for the 11th time in 12 session, jumping to a record above $1,200 an ounce as declines in the dollar spurred investor demand for an inflation hedge.

Australia’s dollar strengthened, rising 1.3 percent versus the yen and 0.9 percent against the U.S. currency, as the nation’s central bank increased interest rates for an unprecedented third consecutive month, citing the pace of Asia’s economic recovery.

Tags: Dubai,dubai