http://www.saudigazette.com.sa/index.cfm?method=home.regcon&contentID=2009112755603
Dubai default threat rattles world stocks LONDON/DUBAI - Global stock markets fell sharply Thursday on mounting fears of a debt default by Dubai and tighter lending conditions in China, analysts said. European shares slipped 3.3 percent on Thursday to record their biggest one-day percentage drop in seven months as concerns about debt problems in Dubai weighed on the market, with banks the major fallers. The pan-European FTSEurofirst 300 index of top shares closed down 33.81 points at 988.14 - its lowest close in three weeks. Across Europe, the FTSE 100 index was down 3.2 percent, Germany's DAX was 3.3 percent lower and France's CAC 40 was down 3.4 percent. "The Dubai worries have played a major role in rattling market sentiment at a time when the US 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. I do not think it really reflects the underlying fundamentals of the economy and the market, it is just a sentiment shock." However,a senior Dubai official defended on Thursday his government's proposal to suspend debt payments by its Dubai World conglomerate, as global stock markets fell amid fears of widespread default. The suspension of payments on Dubai World was "carefully planned" and done in full knowledge of how the markets would react, a senior official said on Thursday. "Our intervention in Dubai World was carefully planned and reflects its specific financial position," Sheikh Ahmed bin Saeed Al-Maktoum, chairman of the Supreme Fiscal Committee, said in a statement. He added that "further information will be made available early next week." "The government is spearheading the restructuring of this commercial operation in the full knowledge of how the markets would react. We understand the concerns of the market and the creditors in particular. "However we have had to intervene because of the need to take decisive action to address its particular debt burden." Ratings agency Standard and Poor's described the debt moratorium as a default. Dubai, whose extravagant building projects have been largely put on hold since the start of the global financial crisis, said on Wednesday it would ask creditors at its flagship firms Dubai World and property developer Nakheel to delay repayment on billions of dollars of debt. Banks took the most points off the index on concerns about their potential exposure to debt problems in Dubai. HSBC, Banco Santander, BNP Paribas, Barclays and Credit Suisse were down 3.3 to 8 percent. Other financials moved lower on Dubai exposure concerns. In Asia, Shanghai nosedived 3.62 percent, Tokyo fell 0.62 percent and Hong Kong closed 1.78 percent lower. Chinese shares were also hit by the prospect of tighter banking rules and worries about monetary policy next year. New York markets were closed Thursday for the Thanksgiving Day holiday in the United States. "We have two major factors weighing on equities and other risk markets: Dubai's call for a moratorium on its debt repayment to May and more stringent capital adequacy requirements for Chinese banks - but Dubai is bigger," David Morrison, an analyst at financial betting firm GFT, told AFP. The Dubai government announced that it would revamp the Dubai World group and wanted its lenders to extend its maturing debt until at least May 2010. Dubai added that it had raised $5 billion in a new bonds issue aimed at helping meet other debt obligations. Meanwhile, share trading on the LSE was halted for more than three hours in mid morning trade following a technical glitch. - Agencies [Non-text portions of this message have been removed]
