Dubai Rattles The Worlds Stock Markets
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Fears of a potential sovereign default by Dubai roiled financial markets Thursday, sinking stocks in Asia and Europe and pushing up government-bond prices as investors sought safe havens.
Dubai late Wednesday said it would restructure Dubai World and announced a six-month "standstill" on repayments of the state-run wide-ranging conglomerate's debt.
Analysts said Dubai's woes were a blow to sentiment, serving as a reminder that potential trouble spots remain.
"I don't see this as a massive issue but it's another warning to where the world got itself last year with loose monetary conditions [and] loose lending," said Naeem Wahid, market strategist at Lloyds TSB. "And, in a few cases, the problems are still out there and we could continue to see these kinds of nasty surprises" in the future.
The news sent the cost of insuring the emirate's sovereign debt against default soaring for a second day. The developments also weighed on other emerging markets, boosting the cost of insurance against default against other Middle Eastern and emerging-market countries and undercutting Central and Eastern European currencies.
Asian stocks fell early Thursday. European stocks were under pressure, with the pan-European Dow Jones Stoxx 600 index off nearly 2%.
