| |
| |
 |
| |
|
| |
|
| |
|
LONDON - Global stock markets dropped for a second day running on Friday over investor alarm about the potential for a widespread default after Dubai's shock demand to suspend the debt of a key state company.
Asian indices suffered massive falls, with Hong Kong's Hang Seng Index slumping almost five percent by the close. 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.
Shortly after the start of European trading, London's benchmark FTSE 100 index was down 0.36 percent at 5,175.44 points, one day after falling by its sharpest amount since March.
Frankfurt's DAX 30 shed 0.56 percent to 5,582.50 points and in Paris the CAC 40 lost 0.51 percent to 3,660.68.
The losses came after Europe's major stock markets had plunged by more than three percent on Thursday after Dubai's shock call to suspend the debt of a key state company fuelled anxiety over heavy public borrowing.
The continued widespread 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.
Wall Street reopens on Friday for a shorter-than-usual session after shutting Thursday for Thanksgiving.
"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, said Barclays Capital analyst Huw Worthington.
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 US dollars, 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."
"Of all the glitzy emirates on the western shore of the Gulf, Dubai is easily the brashest. With the grenade it has just lobbed into the capital markets by calling for a six-month creditor standstill for Dubai World, it is effortlessly living down to that reputation," the FT said.
The sheer size and exuberance of Dubai's property boom was always unsustainable, the newspaper said, noting that the emirate doubled in size and house prices almost quadrupled from 2002 to 2007, since when property prices have halved.
Analysts at Exane BNP Paribas said that "so far the situation in Dubai seems contained, but a rise in government bond yields due to a higher risk premium because of soaring budget deficits is one of the main risks" for 2010.
- AFP/ir
|
