Dubai’s Shares Retreat Led by Air Arabia as Italy’s Yields Rise, Oil Drops

Dubai’s shares led declines in the Persian Gulf as oil declined and amid concern new leaders in Europe will struggle to contain the soverign debt crisis after Italy paid the highest yield since 1997 at a sale of five-year bonds.

Air Arabia, the Middle East’s biggest no-frills airline, declined 1.4 percent after it had its price estimate cut 4.6 percent at Morgan Stanley. Emirates Integrated Telecommunications Co. (DU), the United Arab Emirates phone company known as Du, slipped to the lowest in almost two weeks. Dubai’s DFM General Index (DFMGI) retreated 0.4 percent to 1,387.81 at the 2 p.m. close in the emirate after rising 0.7 percent yesterday. The Bloomberg GCC 200 Index (BGCC200) of Gulf shares dropped 0.1 percent.

“External markets have been unable to maintain momentum,” and “buyers here applied the brakes,” said Julian Bruce, equity sales head at EFG-Hermes Holding SAE in Dubai.

In Europe, the benchmark Stoxx Europe 600 Index dropped 1 percent and the Standard & Poor’s 500 Index futures declined 0.6 percent, erasing earlier gains. Italy sold 3 billion euros ($4 billion) of five-year bonds today at the highest yield in more than 14 years. Stocks initially climbed after Mario Monti, a former European Union competition commissioner, was appointed Italy’s new prime minister, as the country tackles the euro region’s second-biggest debt.

In Greece, the nation’s finance minister, Evangelos Venizelos, said his priority is to ensure the country gets a sixth loan under an European Union-led bailout after Prime Minister Lucas Papademos took charge of a new interim government. Yields on Italian five-year notes climbed to 6.57 percent.

Slower Growth

About 32 million dirhams ($8.7 million) exchanged hands in Dubai trading today, compared with this year’s daily average of 135 million dirhams, according to Bloomberg data.

The U.A.E. and Saudi Arabia, the biggest Arab economy, are likely to post slower economic growth next year as oil prices drop and this year’s government expenditure won’t recur, Kai Stukenbrock, director of sovereign and international public finance ratings at Standard Poor’s, told reporters in Dubai today.

Saudi Arabia’s economic growth will drop to about 3.8 percent in 2012 from 6 percent this year, he said. Growth in the U.A.E., the second-biggest Arab economy, will slow to “close to 3 percent” from 4.5 percent, he said.

Crude for December delivery fell as much as 1.3 percent to $97.71 a barrel on the New York Mercantile Exchange. Gulf Arab oil exporters supply about a fifth of the world’s oil.

Air Arabia (AIRARABI) slipped 1.4 percent, the most since Nov. 9, to 62.1 fils. The company had its price estimate lowered to 62 fils from 65 fils at Morgan Stanley. Du dropped 0.7 percent to 2.9 dirhams, the lowest since Nov. 2.

Abu Dhabi’s ADX General Index (ADSMI) slipped 0.2 percent. Bahrain’s benchmark declined 0.4 percent and Oman’s MSM30 Index (MSM30) fell 0.1 percent. Saudi Arabia’s Tadawul All Share Index (SASEIDX) dropped 0.3 percent. Kuwait’s SE Unweighted Index was little changed, while Qatar’s QE Index (DSM) rose 0.3 percent.

To contact the reporter on this story: Zahra Hankir in Dubai at zhankir@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net

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