Confidence about the world economy was hit hard by the news that Dubai World, a government investment company with around $60 billion worth of debt, has asked creditors if it can postpone forthcoming payments until May. Investors are wondering whether the current uncertainty surrounding the emirate has brought the eight-month equities bull run to an end.
Analysts said more clarity about the long-term impact of Dubai's troubles would likely emerge next week, when Wall Street is back to normal trading hours following the Thanksgiving Day holiday. U.S. markets are only open for half the day Friday.
"It is likely to take at least a few days before the implications of the impact of a possible default from Dubai are properly digested but for the present it seems that the market is seeing this negative news as a blow to the global recovery but not one that will push it off course," said Jane Foley, research director at Forex.com.
Investors were also keeping a close eye on associated developments in the currency markets after the dollar slid to a new 14-year low of 84.81 yen.
Dubai debt: news latest
Dubai will remain an attractive regional business hub, despite the government having to asked for a standstill agreement regarding the debts of its flagship companies Dubai World and Nakheel, a senior figure has said in a statement.
The government's intervention in the debt restructuring at Dubai World, was aimed to ensure the holding company’s "long term commercial success", said Sheikh Ahmed Bin Saeed Al Maktoum, chairman of Dubai Government's Supreme Fiscal Committee in comments published by news agency WAM.
“We want to ensure resources are deployed in the full knowledge that they are used to enhance the businesses of the Dubai World Group, build on the restructuring that has already been taking place and ensure long term commercial success," said Sheikh Ahmed, who is also chairman of Dubai Civil Aviation Corporation, chairman and chief executive of Emirates Airline and Group.