* Dubai bailout lifts risk sentiment
* Global stocks rise, Europe up 0.8 percent
* Dollar weaker
* Concerns remains about debt, exit strategies
By Jeremy Gaunt, European Investment Correspondent
LONDON, Dec 14 (Reuters) - Some confidence returned to
financial markets at least for the short term on Monday after
Abu Dhabi bailed out debt-stricken fellow emirate Dubai, sending
stocks higher and weakening the dollar.
Greece, another debt worry for investors after being
downgraded by Fitch Ratings, also said it was taking steps to
get its financial house in order.
Financial markets have been shaken in recent weeks by
concerns over debt in Dubai, Greece and Spain, with Britain and
Ireland hovering in the wings.
Dubai appeared to have dodged a bullet on Monday when Abu
Dhabi gave it $10 billion in aid, some $4.1 billion of which was
to be used by state-controlled property developer Nakheel to
repay its maturing Islamic bond. []
The money essentially will stop Nakheel from defaulting.
"The Abu Dhabi/Dubai story will lead the headlines so ...
the momentum today should be for more risk appetite," said
Morten Povlsen, a rates strategist at Nordea in Copenhagen.
World stocks as measured by MSCI <.MIWD00000PUS> were up 0.4
percent with European stocks leading the way. The FTSEurofirst
300 <> gained 0.8 percent.
Other risk plays were also in evidence, with the dollar
losing some of its recent strength to drop a third of a percent
against a basket of currencies.
The issue before investors, however, will be whether the
Dubai bailout is simply a momentary boost for risk appetite and
whether the end of year caution that has been apparent the past
few weeks will return.
"In the near term, it's obviously good news because
liquidity issue for Dubai has now passed in the short term,"
said Ronan Carr, European equity strategist at Morgan Stanley.
"But the broader issue of government finances being
stretched... the risk of fiscal crisis somewhere in the world is
a theme that will come and go in the next few years."
STIMULUS
Adding to investor debt-angst, meanwhile, is the worry about
what impact the withdrawal of special liquidity programmes by
central banks will have.
The European Central Bank got things under way on December 3
when it said the cost of funds at its third and final 12-month
liquidity operation would be indexed to its main policy rate.
Investors are also a bit jittery about the U.S. Federal
Reserve's meeting this Wednesday.
No change is expected in rates, but the language used in the
statement will be devoured by markets looking for signposts to
the exit.
The recent jobs data -- far stronger than expected, if still
weak -- also may prompt the Fed to consider tightening earlier
that currently assumed.
Such a move could have a bigger impact on currencies that
the swing away from the dollar seen on Monday after the Dubai
news. Higher rates would boost the dollar.
On Monday, however, its losses were widespread. The euro
<EUR=> rose 0.2 percent to $1.4656 and the dollar slid 0.4
percent to 88.73 yen <JPY=>.
"The Abu Dhabi news helped risk sentiment ... But we should
be careful, the markets are thinning out so we could see some
volatile moves," said Kasper Kirkegaard, currency strategist at
Danske Markets in Copenhagen.
(Additional reporting by Dominic Lau, Naomi Tajitsu and Emelia
Sithole-Matarise; Editing by Victoria Main)
