By Julie Cruz Nov. 26 (Bloomberg) — The benchmark index for European stock options jumped the most in a year as Dubai’s proposal to delay debt payments roiled equity markets worldwide. The Vstoxx Index , which gauges the cost of using options to protect against declines in the Dow Jones Euro Stoxx 50 Index , rallied 28 percent to close at 30.35, the steepest gain since Oct. 16, 2008, when it reached a record at 87.51. The measure has averaged 26 over the past decade. “I can’t see what’s going to drive the market upside especially given this Dubai situation which a lot of people didn’t see coming,” said Ian Murrell , a London-based broker at Wills & Co. “I wouldn’t want to risk any of this year’s gains especially with what’s going on in Dubai. Fund managers have had a fantastic year, and would not buy into this market.” The Dubai government’s attempt to reschedule debt triggered declines in stocks worldwide that had been rebounding from the worst financial crisis since the Great Depression. The Euro Stoxx 50, which has rallied 55 percent since this year’s low in March, slumped 3.4 percent to 2,799.44 today. That’s the biggest drop since April for the euro region’s benchmark index. The cost of protecting government notes from Abu Dhabi to Bahrain rose, extending the steepest increase since February as Dubai World, with $59 billion of liabilities, sought a “standstill” agreement from creditors. Today’s closing level of the Vstoxx compares with 20.48 for the Chicago Board Options Exchange Volatility Index yesterday. The VIX, also known as the “fear gauge,” measures the cost of using options as insurance against declines in the Standard & Poor’s 500 Index. It reached a low for the year on Nov. 24 amid speculation the worst of the global economic crisis is over. U.S. markets are closed today for the Thanksgiving Holiday. — With assistance from Alexis Xydias in London. Editor: Christiane Lenzner To contact the reporter on this story: Julie Cruz in Frankfurt at jcruz6@bloomberg.net ;
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European Options Index Jumps Most Since October 2008 on Dubai Debt Concern
