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11-27-2009, 08:37 AM
Debt anxiety fuels selloff

Last Updated: Friday, November 27, 2009 | 10:18 AM ET Comments25Recommend18.
CBC News

U.S. stocks opened substantially lower Friday amid growing concern over Dubai's financial stability.

The Dow Jones industrial average began the day with a loss of more than 200 points and was still down 182 points, or 1.7 per cent, in later trading.

The Nasdaq index fell two per cent, and the broader Standard & Poor's index of 500 stocks also tumbled two per cent in early trading.

Dubious on Dubai
Nervous investors in many countries continue to show concern regarding the ability of the Middle Eastern country of Dubai to repay two-thirds of its national debt.

"The world is watching whether that will have any substantial impact ... Dubai World is just like a small window that might reflect another financial tsunami," said Cai Junyi, an analyst for Shanghai Securities.

World markets have slumped after Wednesday's surprise announcement that Dubai World, a state-owned corporation which holds $59 billion US in debt, needed an extra six months to make payments.

A number of mainly European and Asian banks had lent money to Dubai World and could face the loss in value of some of these holdings if the country is unable to meet its payment obligations on a debt mountain of $80 billion.

The situation for U.S. equity markets is additionally precarious because those markets were closed on Thursday — the first full day of stock trading after Dubai's announcement — for American Thanksgiving.

Thus, analysts argued U.S. traders might play catch-up in terms of selling equities fast on Friday rather than trying to wait out the crisis and hold their stocks.

TSX stabilizes
Canada's main stock exchange, the TSX, was open on Thursday and tumbled 200 points, but the descent slowed Friday morning. The main index in Toronto was down 18 points to 11,418.

But declining issues outnumbered gainers 170 to 26, with energy stocks losing one per cent and material stocks down 2.3 per cent.

For these issues, falling commodity prices, indirectly linked to the Dubai crisis, were more to blame than worries about financial links to that country.

Europe and Asia
European stocks lost value early in the trading day but regained value and generally closed the day in positive territory, after sharp losses Thursday.

The FTSE 100, the key London index, was up 0.25 per cent while Germany's DAX index gained 0.34 per cent and France's CAC 40 added more than 0.5 per cent, reviving from Thursday's shock.

Asian markets got crunched after missing most of Thursday's hit. Hong Kong's Hang Seng index lost almost five per cent while Japan's Nikkei index dropped more than three per cent.

with files from The Associated Press

http://www.cbc.ca/money/story/2009/11/27/world-markets-dubai-friday.html#socialcomments (http://www.cbc.ca/money/story/2009/11/27/world-markets-dubai-friday.html#socialcomments)