FTSE posts worst loss since March after Dubai debt concerns
Joshua Raymond, Market Strategist at City Index commented: "The FTSE 100 fell over 3% to post its biggest percentage loss since March after concerns remained regarding banking exposures to delays in debt repayments by Dubai World and after the LSE suffered technical difficulties, suspending trading for over 3 hours.
Dubai World debt problems
Its been a fairly horrible day on the markets and the key reason has been all about investor fears that the delay in payment of debt by Dubai World might spin off and affect key European Banks who are highly leveraged in that region. The major banks involved will now have to factor into account that they may not be receiving the set amount of capital from Dubai as expected and this could handicap their efforts elsewhere. As a result, European banks such as HSBC, Barclays, Royal Bank of Scotland and BNP Paribas have been the subject of mass selling, with share prices falling 7%.
Whether or not the problems at Dubai will be enough to create spin off affects into other sectors remains to be seen but this cannot be discarded in the near term.
The key issue now is that any company that has direct or indirect links to Dubai now has a question mark over it and with the markets making some strong gains of late, investors have taken no chances today and have moved to cash in their profits.
LSE and Porsche
The LSE in particular has suffered with investors fearful that Borse Dubai, as a key stake holder, may have to sell its stake. The technical problems it has experienced today has also not done itself any favours with competition increasing in the sector. Porsche shares have also suffered for similar reasons with the Qatar Investment Authority holding a 10% stake.
The Timing of the problems not helping
The timing of the LSE and Dubai World problems have not helped matters and may also have had an exacerbating affect on the losses suffered today. Dubai now go on holiday until December 6th and so there whilst the phones may be ringing over there, no one is picking up which is undoubtedly stoking the fire a bit.
Add to this the fact that volumes are very low with the US markets closed for Thanksgiving holiday and today's technical problems on the LSE may have also handicapped volumes too. As a result, today's losses may have been exacerbated somewhat.
FTSE trades below 4200
The FTSE 100 today traded below support levels of 4200 for the first time in over 2 weeks and this could also signify a bit of a turning point in the markets if we fail to regain this level soon."