FTSE 100 week: Dubai crisis rocks Footsie
Rising fears over the financial crisis in Dubai weighed heavily on the market this week, stopping the FTSE 100 in its tracks.
Footsie action: We round up the week's trading
Despite a bullish start to trading on Monday, the blue-chip index by Friday morning was almost 2% down on the week but a late rally helped drive the leaderboard back up to regain some of its losses.
The index of the UK's top firms, eventually closed flat over the week, or 0.11% points down, at 5,245.73.
The damage was done on Thursday when the Footsie collapsed by 3% - its steepest drop in eight months – wiping a reported £40bn off the market.
Traders were unnerved after it emerged that two of Dubai's flagship firms planned to delay repayment on billions of dollars of debt as a first step toward restructuring Dubai World, the conglomerate that spearheaded the emirate's breakneck growth.
The UK has an estimated £3bn invested in Dubai and the crisis has meant that UK companies are thought to be owed more than £400m by debt-riddled Dubai firms
Thursday's sell-off was interrupted by technical difficulties at the London Stock Exchange, which meant trading was suspended mid-morning. But stocks continued to fall when trading resumed at 14.30.
Commenting on the market turmoil, David Buik of stock brokers, BGC Partners, said: 'The Dubai debt debacle and the uncertainty that it has created as a result of the Kingdom's forthcoming holiday has had a severe knock-on effect on equity markets, as well as throwing the bond market into turmoil.'
'It's absolute paranoia. This is the last thing the market needed in the run up to Christmas,' added Manus Cranny, head of sales at MF Global. 'It's not just the Dubai debt, investors are wondering what other black holes there are and what the ramifications are for global companies.'
The nervousness quickly spread to financial firms, who were among the worst hit as concerns over the global financial system returned.
The London Stock Exchange, in which Borse Dubai has a large stake, endured the steepest fall among the blue-chips, after falling 8% to 776p. Standard Chartered lost 6% 1,520p as a result of the Dubai crisis. The Asian-focused bank has racked up commitments of around £7.5bn in the United Arab Emirates, or 7% of its loan book, according to NCB Stockbrokers.
Royal Bank of Scotland - which, according to figures released this week, alongside Halifax Bank of Scotland secretly borrowed almost £62bn from the Bank of England at the height of last year's financial crisis - fell 4% to 34.73p.
Europe's biggest bank, HSBC, which has around £9.6bn of exposure to the UAE, representing 2% of its loan book, also loosened by 4% to finish at 706.3p while Barclays shed 2% to 297.85p. Lloyds Banking Group, which this week priced its massive £13.5bn rights issue at 37p a share, finished flat at 58.6p.
Hedge fund Man Group fell 5% to 324.7p, as the stock turned ex-dividend, meaning shareholders are not entitled to the latest payout while insurer Legal & General lost 4% to 80.95p.
Property shares also stumbled on the Dubai worries. Britain's recovering commercial real estate market could be scuppered if the Dubai government was forced to hold a firesale of its international real estate.
Hammerson fell 4% to 411.2p, Land Securities, the UK's largest listed property firm, was down 2% to 670.5p, while British Land was 3% off at 459.8p.
Within the FTSE 250, utilities provider, Northumbrian Water enjoyed a better week, gaining 11% to 269.9p while Harmony Gold Mining also added 11% to 665p.
Spirax-Sarco Engineering cheered 3% to 1,108p. UBS generated interest by upgrading to buy from neutral. It expects to see about 5% organic growth in 2010. Looking to other smaller caps electrical equipment group Image Scan Holdings, pushed up 70% to 2.12p.
Online gaming group PartyGaming rose 2% to 2654.8p. The US House of Representatives Committee on Financial Services has announced a hearing on 3 December to discuss chairman Barney Frank's Bill to regulate US online gaming.
Gold bullion, which hit a new record of $1,195 an ounce at one point on Thursday, subsequently slumped from around to $1,138 within a couple of hours. On Friday, the price tumbled nearly 5% - its biggest one-day fall in a year - amid a widespread sell-off of assets due to the Dubai debt concerns.
Back in the top flight, decent corporate results helped others make progress. Caterer Compass, marched its way to the top of the league, with an 8% gain to 433.4p, as annual results came in a touch ahead of hopes despite flat sales expected next year.
Luxury goods group Burberry added 1% to 572.5p after Goldman Sachs upgraded its stance on the company to 'neutral' from 'sell' in a review of the luxury goods sector.
Among the miners Kazakhmys lost 2% to 1,237p, Rio Tinto was also down 2% at 3,089.5p as the sector littered the fallers' board. BHP Billiton however, added 3% to 1,864p. It dismissed talk on Thursday that rival Rio Tinto was baulking at a proposed $116bn joint venture in iron ore, insisting the two were close to a binding agreement.
THE WEEK AHEAD
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