Dubai ripples rip markets apart

Wall Street turned lower on Friday, as traders scrambled to play catch-up after downturns in Asian and European markets over the Thanksgiving holiday.

Investors were spooked by reports that Dubai World, the emirate’s investment vehicle, was seeking to suspend repayments on all or part of its $59 billion in debt. That pushed shares down more than three per cent on European markets on Thursday; Asia markets posted similar declines on Friday.

Immediately after the markets opened, the Dow Jones industrial average fell about 230 points, but shares then started to regain ground. In the last 30 minutes of trading, the Dow was down 1.3 per cent or 129 points. The broader Standard & Poor’s 500-stock index fell 1.46 per cent or 16 points, and the technology-dominated Nasdaq slipped 1.3 per cent or 30 points. The stock markets will close at 1 p.m. Friday after being closed Thursday for Thanks-giving. The bond markets close at 2 pm.

Analysts said they thou-ght Thursday’s declines might be overdone, and that a true picture of the market’s reaction would emerge next week as buyers return from the holiday and as more details on the Dubai situation come out.

A research note Friday from Credit Suisse estimated that European banks may be the hardest hit if Dubai World cannot meet its obligations, with total exposure estimated at $19.6 billion. European banks on Friday played down their exposure.

UK banks have loans totaling $50 billion into the UAE, out of total loans of $123 billion by international banks, the Bank of Internat-ional Settlements said.

European markets closed slightly higher. The FTSE 100 in London was up 52 points, or one per cent, while the DAX in Frankfurt rose 71 points or 1.3 per cent. In Paris, the CAC-40 increased 42 points or 1.2 per cent.

In Europe, investors were concerned about the state of public finances and possible credit rating downgrades in Greece and Ireland.

Asian markets fell. The Hang Seng index in Hong Kong declined 4.8 per cent and South Korea’s key market gauge, the Kospi, dropped 4.7 per cent. The Nikkei 225 index in Japan and the Taiex in Taiwan both sagged 3.2 per cent.

The market turmoil was touched off by Wednesd-ay’s announcement from Dubai, one of the seven members of the United Arab Emirates (UAE), that it was asking banks to allow its investment company Dubai World to suspend its debt repayments for six months.