World stock markets plunged Friday as concerns about contagion from Dubai’s debt troubles kept investors off riskier bets. Markets from Sydney to Sao Paulo reeled under a wave of fear after Dubai World, the main development engine of Dubai’s breakneck growth, said Wednesday it is asking creditors to agree to standstill on billions of dollars of debt. Resulting concerns of a massive default unnerved investors, sending benchmark indexes from Asia to Europe sharply lower.
Markets in Asia were badly hit, with the main indexes in Hong Kong and South Korea plunging nearly 5%. Hong Kong’s Hang Seng plummeted 1,075.91 points, or 4.8%, to 21,134.50, while South Korea’s Kospi plunged 4.7% to 1,524.50. In Tokyo, the Nikkei 225 stock average, which fell 184.94 points, or 2%, yesterday, lost 301.72 points or, 3.22%, to 9,198.30.
US markets, which were closed Thursday for the Thanksgiving Holiday, are set to witness a heavy round of selling Friday as investors try to assess the implications of the report from Dubai — Dow Jones industrial average futures are down 222, or 2.1%, at 10,220. Standard & Poor’s 500 index futures are down 29.20, or 2.6%, at 1,079.70. Nasdaq 100 index futures are down 47.25, or 2.6%, at 1,747.00. Trading volume is likely to remain light ahead of a shortened trading session. With the Muslim holiday further clouding the implications of the Dubai situation, trading is likely to remain volatile.
On Wednesday, US markets rose in a lightly traded session as a drop in jobless claims and forecast-beating home sales nudged investors’ appetite for riskier investments.
The Dow Jones industrial average rose 31 points, or 0.3%, to 10,464.40, its fresh 13-month high. The S&P 500 rose 5 points, or 0.5%, to 1110.63, also a new 13-month high. The tech-heavy Nasdaq advanced 7 points, or 0.3%, to 2176.05, slightly off a 13-month high. On the New York Stock Exchange, advancing issues beat those that declined by a two-to-one margin on volume of 800 million shares.
Meanwhile, the dollar continued its retreat against a basket of its rivals, plunging to a fresh 15-month low. Gold prices hit another record high. Bond prices were mixed. The benchmark 10-year Treasury note rose, sending the corresponding yield down to 3.28% from 3.31% late Tuesday.
