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Dubai debt fears rattle markets Dubai debt fears rattle markets
(about 1 hour later)
Worries over Dubai's debt problems drove down Europe's share markets for the second day running. Worries over Dubai's debt problems have driven down Europe's share markets for a second day running.
The main share indexes in London, Paris and Frankfurt all opened more than 1% lower before easing back slightly. The main share indexes in London, Paris and Frankfurt all opened more than 1% lower before recovering slightly.
The falls follow news from the state-owned Dubai World that it would delay repaying some of its debt. Earlier, Asia's markets were down sharply. The falls followed news from the state-owned Dubai World that it would delay repaying some of its debt. Earlier, Asia's markets were down sharply.
Tokyo's benchmark Nikkei fell 3.2% to 9,081.52. In Hong Kong, the Hang Seng index ended down 4.84% at 21,134.5.Tokyo's benchmark Nikkei fell 3.2% to 9,081.52. In Hong Kong, the Hang Seng index ended down 4.84% at 21,134.5.
Oil prices also fell. US crude dropped 4.5% to $74.51 a barrel and London Brent Crude was down $1.26 to $75.73. Dubai World is the centrepiece of the Gulf state's economy. David Buik, senior partner at BGC Partners, said: "You can't just say to the world: 'I don't want to pay my debts'. There is no income coming in from any of these properties. I think this is shocking PR."
Holiday hiatus
The news shook markets that are recovering from the collapse of the US housing market and contagion that threatened to rupture the global financial system last year.
It was the timing of the announcement as much as the lack of clear information that heightened nerves. The first news emerged late on Wednesday, as the Muslim world was preparing for its Greater Eid celebrations.
It also coincided with the closedown of the world's most important share market, with US markets winding down for Thursday's Thanksgiving holiday.
WHAT IS DUBAI WORLD? The emirate's flag bearer in global investmentsHas a central role in the direction of Dubai's economy Assets include DP World, which caused a storm when trying to take over six US portsProperty arm Nakheel built The Palm Islands and The World developments Send us your comments
The biggest underlying fear is that Dubai's problems could reignite the financial turmoil of the credit crisis. That would lower global demand for a whole range of commodities, including oil.The biggest underlying fear is that Dubai's problems could reignite the financial turmoil of the credit crisis. That would lower global demand for a whole range of commodities, including oil.
WHAT IS DUBAI WORLD? Dubai World is the emirate's flag bearer in global investments. Oil prices have dropped sharply. US crude fell 5% to $74.23 a barrel and London Brent Crude was down $1.47 to $75.42.
It has a central role in the direction of the emirate's economy and has four main areas of operations: Transport & Logistics, Drydocks & Maritime, Urban Development, and Investment & Financial Services. Uncertainty of the scale of banks' exposure to Dubai hit banking shares at first. However, bank shares recovered strongly throughout Friday morning.
Its assets include DP World, one of the largest marine terminal operators in the world, which sparked a national security debate in the US when it moved to take over six of the country's ports. Dubai, which has less oil money than many of its neighbours, became a trading and tourism hub with global ambitions.
Back home, its own maritime ambitions are driven by Dubai Maritime City which is aiming to turn Dubai into a major ship-building hub.
Perhaps the most easily visualised area of operation is Nakheel, the property developer behind projects such as The Palm Islands and The World.
Its fourth main business area is Istithmar World, which is the group's investment arm. Send us your comments
It said on Wednesday it would ask creditors of the state-owned Dubai World and Nakheel to agree to a standstill on billions of dollars of debt as a first step towards restructuring.
David Buik, senior partner at BGC Partners, said: "You can't just say to the world: 'I don't want to pay my debts'. There is no income coming in from any of these properties. I think this is shocking PR."
The Gulf state, which has less oil money than many of its neighbours, became a trading and tourism hub with global ambitions.
Dubai World, the conglomerate that led the emirate's expansion, had $59bn (£36bn) of liabilities as of August, a large proportion of Dubai's total debt of $80bn. Its subsidiary Nakheel was the builder of the landmark palm tree-shaped island developments off Dubai.Dubai World, the conglomerate that led the emirate's expansion, had $59bn (£36bn) of liabilities as of August, a large proportion of Dubai's total debt of $80bn. Its subsidiary Nakheel was the builder of the landmark palm tree-shaped island developments off Dubai.
The news shook markets that are recovering from the collapse of the US housing market and contagion that threatened to rupture the global financial system last year.
Banks and builders were hit hardest as they are the most likely to be exposed to firms with property at the sharp end of the slump.
Are you in Dubai? What is your reaction to the Dubai World announcement? What effect is the economic recession having on Dubai? Send us your views using the form below.Are you in Dubai? What is your reaction to the Dubai World announcement? What effect is the economic recession having on Dubai? Send us your views using the form below.
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The BBC may edit your comments and not all emails will be published. Your comments may be published on any BBC media worldwide. Terms & ConditionsThe BBC may edit your comments and not all emails will be published. Your comments may be published on any BBC media worldwide. Terms & Conditions