FTSE tumbles amid Dubai debt fears

12 April 2012

The FTSE 100 index has slipped further as lingering fears over a major debt default in Dubai kept up the pressure on worried investors.

The London market tumbled another 1.5% after a 3% fall in the previous session wiped almost £44 billion from blue-chip stocks.

Markets panicked after Dubai World, the emirate's main development engine, said it was asking creditors to delay paying back its 60 billion US dollar (£36.8 billion) debt.

Asian markets were also under pressure as Hong Kong's Hang Seng fell more than 5% and Japan's Nikkei was 3% lower.

The US was closed for Thanksgiving on Thursday but also looks set to tumble when Wall Street trading resumes.

The latest tumble left just a handful of companies in positive territory early on as trading screens turned red.

The Footsie had been closing in on the highest levels since before the collapse of Lehman Brothers in September 2008 in recent sessions, but fell through its recent support level of 5200 to reach a low of 5103.8 at one point.

Part-nationalised Royal Bank of Scotland - 84% owned by the taxpayer - was nursing losses of 7%, with HSBC down more than 3%, as traders worried over those with potential exposure to bad debts in Dubai.

The emirate fuelled a building boom with cheap credit but has been hit hard by the downturn. This latest risk to lenders comes just as the global economy is starting to recover from a painful recession with major action taken to prop up banks worldwide.

Heavyweight mining stocks also bore the brunt of the sell-off due to a stronger dollar as investors pulled their money out of risky equity markets. Futures markets are already showing a 3% fall for the Dow Jones Industrial Average when trading begins.

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