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Gordon Brown and banks call for calm over Dubai crisis
Robert Lea and Jim Armitage27.11.09
Bankers and politicians joined tonight in a bid to calm volatile stock markets panic-stricken by the Dubai crisis.
As US investors returned from the Thanksgiving Holiday this afternoon, the Dow Jones Industrial Average crashed more than 160 points, playing catch-up from the tumbles seen around the world since Dubai admitted on Wednesday night its biggest state-owned company would not be able to make its monthly debt repayments.
Investors took fright yesterday in Europe and overnight in Asia, although after another panicky start of heavy selling this morning, stock markets in London and on the continent calmed to be broadly flat by the afternoon.
Gordon Brown, speaking at a Commonwealth summit in the Caribbean, said: “The world financial system is stronger now and able to deal with the problems that arise.
“While it is a setback, I think we will find this is not on the scale of the previous problems we have dealt with.”
Downing Street said the Treasury, the Financial Services Authority and the Bank of England are “continuing to closely monitor” the situation.
Meanwhile, HSBC chief executive Michael Geoghegan pledged his ongoing commitment to the region, declaring: “I'm confident the leadership of Dubai and the United Arab Emirates will overcome their short-term issues, which have been somewhat sensationalised.”
He added that the Middle East was an “important and high potential” part of HSBC, albeit only representing 2% of the balance sheet. HSBC's shares, which fell 5% yesterday, stabilised by this afternoon.
Other banks like Standard Chartered were also today keen to stress that their exposure to Dubai was not overly serious.
Royal Bank of Scotland shares at one stage fell 10% before rebounding later to 33.7p, up 0.7p on the day.
An overnight sell-off on the major stock markets of Tokyo and Hong Kong sent the FTSE 100 down 90 points at one point, before London traders regathered their poise and rallied the blue-chip index to trade at 5148, down just nine points on the day.
The foreign exchange had another day of tumult. The dollar, regarded as a safer haven in difficult times, strengthened against the pound, up 1.5 cents to $1.637.
In the commodities markets, oil slid sharply, down almost 5% on the New York mercantile exchange, off $3.71 at $74.25.
In London, Julian Jessop, chief international analyst at Capital Economics, said: “Dubai's current problems are a long-overdue consequence of the bursting of the global property bubble rather than the start of a new financial crisis.
Nonetheless, they are a timely reminder that the legacy of past excesses in heavily indebted economies will linger for years to come.”
Jessop said markets had assumed Dubai was going to stand behind the
Reader views (14)
In those immortal words "Don't panic!" - after a bit of a wobble, the FTSE100 is back over 5250, still up nearly 200 points on the start of November.
- Paxton Pat, London
When you lose your job in Dubai the employer immediately tells the authorities and your assets are frozen and if you cannot pay off any debt you have your car, flat and any other assets taken from you and then you are thrown into a Dubai jail as has happened to many foreigners unaware of the local law. So its a little bit difficult to have any sympathy for these people who have been building sand castles and who now ask for 6 months breathing space when the tide has comes in. Happy Thanks Giving. Looks like the Turkey has been over cooked.
- Frank, Copenhagen, Denmark
To Denis Regan, harbin china
You appear to belong to a group of people who think that nearly 30 years ago when the tories came to power everything they did thereafter was wrong and terrible. Yet you view the past 12, nearly 13 years of Labour rule thorugh such rose tinted glasses that all their greed, dishonesty, Iraq etc never happened. If a party has been self serving, its the labour party. Look at the personal wealth people like Blair,Mandleson and many other labour MPs have created for themselves on the back of the tax payer. Look at who are in the cushy jobs, the Kinnocks for example and the many labour patsies in quangos. Labour looking after the little people! Don`t make me laugh. Most of the chinese whisper like criticism of the Thatcher years comes from people who were still at school. Time to take a good look back at what has really taken place under Labour during the past 12 years - a socialist government it never was. Give me old money in charge of this country not new anytime.
- Brian G, Norfolk Gorleston
Anyone keeping a large capital sum on stocks at the moment, given the casino-like mentality on the markets, meaning shares can go severely down as quickly as they have gone up since March this year, is on dangerous ground. There are better ways to safely store capital, such as gold, silver, classic cars and bikes, to name four.
- Jon Kent, Hertford. UK
It is people like you who are pessimists who maybe invested and lost who cause the problems for the many the so called little people who the Labour Party have helped as well as the so called Middle classes.
Oh ye of little faith,remenber the Tories 15% Interest rates,fall in the pund,Billions lost on the Major/Lamont watch.
They should never be forgiven.
Brown and Labour have made mistakes.But god forbid Cameron and Osbourne ever get near Govermement as the Tories have always looked after their own and always said to hell with the majority of us as if you add up the percentage of the polls you can see that the majority of the country do noyt want a Toty Government.
Enough said
- Denis Regan, harbin china
Yep after all that QE as well eh wonder how much of it is leaving the UK? Its the old addage that when the tide goes out you see who's been swimming naked. I think there will be a lot of trading desks cashing in early for Christmas to book their profits and as everyone tries to be first out the door it could have a serious corrective action to a lot of markets
- Wallytrader, London
more importantly- prices of blingy villas in dubai have another 50% decline
- Anon, london
I do not wish to be a killjoy but a deeper recession is
on the way and will hit the UK hard due to lack of
a VIABLE ECONOMIC PLAN by this LAME DUCK BROWN
GOVERNMENT!
- Mike Adams, Taunton
Hmmm....wonder what time they suspend the LSE today!!! 2.31PM GMT is looking like a good bet perhaps they can offer spreads on it!
When the drop does come Buffet & Goldman will just snap up all the bargains and wait for the mini recovery next week (its not like they haven't done it all before anyway.....)
- Jre, London, England
You cant pump billions into thwe Uk economey and print money like cionfecti without reprecussions...which generaly is inflaction....high inflation which then leads to another .recession' so be warned the best , or worst depending if your a Banker ( Bankers have all the money so buy everything up for pennies on the pound ) is yet to come.
Since we are skint we will suffer very badly so my advice clear your debts, stock up on food and essentials and as the markets have p[roven buy gold because that is what the rich and richer have been doing BECAUSE they know a big recession is on the way and money will be so devalued as to be almost worthless.
- Clif, London
What about the Ghost Ships filled with oil? Should we now ignore them and buy direct? It would be nice to see the speculators catch a cold.
- Bill Bailey, Basing England
Heartbreak hotel: the Burj Al Arab is a landmark in Dubai, one of global biggest engines for growth in the global economy
Can we have that again, but in English ?
- Nicholas, Zurich, switzerland
Price of oil dives! Oil is way over-priced considering we are in the worst recession in a lifetime.
We have millions of barrels of oil off the devon coast as well. Oil "dived" because there is no industrial demand, and people are not driving as much, because they are skint!
- Darren, london
Don't worry folks, that doesn't mean the price of petrol will fall.
- Marco Marboni, Kettering, UK
