Fresh fears about Dubai’s ability to resolve its huge debt mountain returned to global stock markets today as shares across America, London and Europe tumbled.

In America, the leading Dow Jones industrial index, fell 104.14 points to 10,285.97.

Earlier today, Abdulrahman al-Saleh, Dubai’s finance minister, admitted that six months may not be enough to restructure Dubai World, the state-owned conglomerate which owns Nakheel, the property developer.

It later emerged that Nakheel made first half losses of $3.65 billion, according to Bloomberg, after taking a huge writedown on the value of its land and developments. Two weeks ago, the Dubai Government asked creditors to grant Dubai World a six-month standstill on its repayments of nearly $60 billion of debt. Dubai World then announced plans to restructure $26 billion of its liabilities.
In London, the FTSE 100 index of blue chip companies tumbled 87.53 points to 5,223.13 with banks driven down by worries over their exposure to Dubai borrowers.

Royal Bank of Scotland, the state-owned bank and the biggest underwriter of loans to Dubai World, was the biggest faller, down 2.55p or 7.7 per cent at 30.69p.

The London Stock Exchange, which is 20.56 per cent owned by the Dubai state-controlled Borse Dubai, which lost 23.5p or 3.18 per cent to 716.5p.

Standard Chartered, also exposed to Dubai World debt, fell 55.5p to £14.37 and Barclays lost 9.5p to 287.5p.

London traders were also unnerved by new data on industrial production, revealing flat output in October, signalling that Britain, which is still in recession, has made a weak start to the fourth quarter. The CBI also published its industrial trends survey, which showed factories expect output to fall in the coming months.

The weak data was released ahead of the Pre-Budget Report tomorrow when the Chancellor is widely expected to reduce his forecast for Britain’s economic growth this year from a decline of 3.5 per cent to 4.75 per cent.

Meanwhile, European markets were unsettled by Fitch’s decision to cut Greece’s sovereign debt rating to BBB+ from A- with a negative outlook – the first time in 10 years a major ratings agency has put Greece, the eurozone’s weakest economy, below an A grade. Fitch cited fiscal deterioration as the reason.

Also weighing on European stock markets was worse-than-expected German industrial production data. German industrial output fell 1.8 per cent in October, largely as a result of weaker production of machinery and cars, against expectations of 1.1 per cent growth.

Source: Times

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