Markets rally as Dubai World talks begin

Stock markets across the world continued their climbs today as negotiations began between Dubai World and its lenders over $26bn (£15bn) of debts.

The FTSE 100 index of leading shares was up 79 points at 5269, a rise of 1.52%.

Markets in Paris and Frankfurt rose by more than 2% each.

And Japan the Nikkei 225 was up 2.4%, Hong Kong’s Hang Seng Index gained 1.4% and the Shanghai Composite was up 1.2%.

Yesterday BTN reported that Abu Dhabi stepped in to guarantee its neighbour’s debts – and in doing so ward off a second potential global recession.

However, some analysts issued caution in thinking the crisis was over.

David Morrison, strategist at GFT told the Wall Street Journal that although the Dubai fallout looked contained, there is still a possibility of contagion, “which will mean, once again, climbing a wall of worry.”

Shares fell for the second day running across the United Arab Emirates and across the wider Gulf region including Qatar and Kuwait.

They did recover slightly after the Dubai royal family insisted that the emirate was still in good shape, although they ruled out guaranteeing the company’s debts.

“We are strong and persistent,” said Sheikh Mohammed bin Rashid al-Maktoum.

The ruler also claimed that the reaction to Dubai World’s problems showed “a lack of understanding”.

The Dubai debt crisis started almost a week ago, when Dubai World – the emirate’s chief investment vehicle – asked lenders for a six-month delay on its debt repayments.

Last night, Dubai World announced that it has begun negotiating with its banks over $26bn of its debts.

There was relief today that the restructuring plan did not involve more of Dubai World’s debt pile, and also does not include several divisions including P&O Ferries.

In a statement, the company said “following a detailed review of the group’s liquidity and capital structure, Dubai World has concluded that it should immediately consider alternatives in respect of the debt obligations of certain entities within the group.”

It is not clear which lenders are now negotiating with Dubai World, but the UK banking sector has the most exposure to the UAE.

HSBC has an estimated $17bn of loans outstanding. Lloyd’s Chairman on Dubai’s Debt Crisis