Dubai debt difficulties hammer stocks
Nov 26, 2009
LONDON (Reuters) - Debt problems in Dubai struck financial markets hard on Thursday, sinking global stocks, lifting safe-haven bonds and driving the dollar higher.
Gold climbed to a new record high but fell back as the dollar rose. European shares had their worst daily loss in seven months.
Banking stocks came under particular pressure because of potential exposure to any bad debt in the Gulf, as did shares in European car companies, some of which are part-owned by sovereign wealth funds from the region.
Markets were trading without much input from the United States, where it was the Thanksgiving holiday.
Dubai said on Wednesday it wanted creditors of Dubai World and property group Nakheel to agree a debt standstill as it restructures Dubai World, the conglomerate that spearheaded the emirate's breakneck growth.
The announcement triggered widespread concern about the once-booming Gulf region's financial health, although some investors differentiated between leveraged Dubai and other more solidly wealthy emirates and countries in the region.
But the worries fed directly into a general nervousness in financial markets about the real state of the world economy at a time when investors are also seeking to lock in 2009 profits.
"The Dubai worries have played a major role in rattling market sentiment at a time when the U.S. is closed and we are not getting anything from anywhere else," said Peter Dixon, economist at Commerzbank.
"It is a day in which market uncertainty has been provoked again."
Others, such as Royal Bank of Scotland, said Dubai's bombshell meant investors would now have to "re-appraise the quality of sovereign support for state-owned entities in the region."
Dubai sought to ease some concerns about international port operator DP World DPW.DI, saying its debt was not included in the restructuring.
But markets stayed nervous and the cost of insuring debt through credit default swaps around the Gulf rose.
EXPOSURE
MSCI's emerging market stock index .MSCIEF was down 2.1 percent, underperforming the broader all-country world index .MIWD00000PUS, which was down 1.5 percent.
There were sharp losses in Europe, where the pan-European FTSEurofirst 300 index .FTEU3 closed down a preliminary 3.2 percent, its biggest daily loss in seven months.
Nov 26, 2009
LONDON (Reuters) - Debt problems in Dubai struck financial markets hard on Thursday, sinking global stocks, lifting safe-haven bonds and driving the dollar higher.
Gold climbed to a new record high but fell back as the dollar rose. European shares had their worst daily loss in seven months.
Banking stocks came under particular pressure because of potential exposure to any bad debt in the Gulf, as did shares in European car companies, some of which are part-owned by sovereign wealth funds from the region.
Markets were trading without much input from the United States, where it was the Thanksgiving holiday.
Dubai said on Wednesday it wanted creditors of Dubai World and property group Nakheel to agree a debt standstill as it restructures Dubai World, the conglomerate that spearheaded the emirate's breakneck growth.
The announcement triggered widespread concern about the once-booming Gulf region's financial health, although some investors differentiated between leveraged Dubai and other more solidly wealthy emirates and countries in the region.
But the worries fed directly into a general nervousness in financial markets about the real state of the world economy at a time when investors are also seeking to lock in 2009 profits.
"The Dubai worries have played a major role in rattling market sentiment at a time when the U.S. is closed and we are not getting anything from anywhere else," said Peter Dixon, economist at Commerzbank.
"It is a day in which market uncertainty has been provoked again."
Others, such as Royal Bank of Scotland, said Dubai's bombshell meant investors would now have to "re-appraise the quality of sovereign support for state-owned entities in the region."
Dubai sought to ease some concerns about international port operator DP World DPW.DI, saying its debt was not included in the restructuring.
But markets stayed nervous and the cost of insuring debt through credit default swaps around the Gulf rose.
EXPOSURE
MSCI's emerging market stock index .MSCIEF was down 2.1 percent, underperforming the broader all-country world index .MIWD00000PUS, which was down 1.5 percent.
There were sharp losses in Europe, where the pan-European FTSEurofirst 300 index .FTEU3 closed down a preliminary 3.2 percent, its biggest daily loss in seven months.
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