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| Dubai alarm drives down world stocks |
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Saturday, November 28, 2009
LONDON: Global stock markets fell for a second day on Friday over investor alarm about possible domino defaults rippling out from a shock request by Dubai to suspend debt payments.
Asian indices suffered massive falls, with Hong Kong slumping almost five per cent by the close.European markets began sharply lower before recovering and by midday were down only a little in value.
Tokyo dived 3.22 percent, hit also by the yen striking a fresh 14-year high point against the dollar, which is bad for Japanese exporters.“Asian and European equity markets have already taken a bath and there is bound to be a similar if smaller reaction in the US later today,” said Howard Wheeldon, senior strategist at BGC Partners in London. “The effects of this ‘crisis’ though may best be measured in potential days rather than weeks.”
Wall Street reopens on Friday for a shorter-than-usual session after shutting Thursday for Thanksgiving.Barclays Capital analyst Huw Worthington forecast a choppy day’s trading for Wall Street. “Many participants are likely to be absent and liquidity may be thin, making for somewhat volatile conditions potentially as (US) markets digest” events in Dubai.
In early afternoon European trading, London’s benchmark FTSE 100 index of leading shares was down 0.11 percent at 5,188.55 points, one day after falling by its sharpest amount since March.
Frankfurt’s DAX 30 shed 0.15 percent to 5,605.58 points, and in Paris the CAC 40 slipped 0.10 percent to 3,677.62, pulling back from a drop of almost two percent shortly after the open.The losses came after Europe’s major stock markets had plunged by more than three percent on Thursday in shock at a request by Dubai to suspend the debt of a key state company.
That request fuelled anxiety over heavy public borrowing. The continued selling came as investors “headed for the exit door” after the Dubai government’s investment vehicle Dubai World sought to suspend debt payments for six months, IG Markets analyst Ben Potter said.
The government of Dubai rocked financial markets on Wednesday when it said it would ask creditors of its Dubai World conglomerate, which has reported debts of 59 billion dollars (39.3 billion euros), for a debt moratorium of at least six months.
The Financial Times described the shock announcement as a “serious misjudgment or, more likely, a breathtaking cock-up.” In an article headlined “A breathtaking blunder in Dubai,” the financial daily said the Dubai government’s decision “leaves a trail of unanswered questions that has done real damage to its reputation.”
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ISSN 1563-9479 
