By: Reuters

European shares fell sharply on Thursday, hurt by debt problems in Dubai that sent bank stocks lower while commodity shares slipped on weaker crude and metals prices.

France’s CAC and Germany’s DAX were down 1.7 and 1.8 percent respectively. Britain’s FTSE 100 was indicated 1.9 percent down before trading halted at the London Stock Exchange due to technical difficulties.

The LSE said all London shares prices were indicative.

The FTSEurofirst 300 index of top European shares was indicated at 1,002.98 points, down 2 percent, after hitting a three-week low.

Financial shares were the biggest drag as concerns on the health of the global financial system resurfaced as Dubai said two of its flagship firms planned to delay repayment on billions of dollars of debt.

The European benchmark index is still up more than 54 percent from its lifetime low of March 9, as investors have become more confident on the prospects for economic recovery.

“It (the Dubai credit issue) does bring to the fore that much of what we have seen in the markets really has been supported by liquidity,” said Georgina Taylor, equity strategist, Legal & General Investment Management.

“It shows how vulnerable the market still is to newsflow,” she said.

“But it should be seen as a country-specific issue. It’s not something systemic. It’s about risk appetite. It’s a reason for some of those involved in the market to scale back a bit, while we try to understand what’s going on,” she said.

Shares in the London exchange [LSE-LN 779.50 -35.00 (-4.3%)] were indicated 4.2 percent down as traders cited concern that Bourse Dubai held a substantial stake in the company.

This added to a 3.8 percent decline on Wednesday, when the operator reported a fall in first-half profit.

Porsche fell 6.9 percent, as traders pointed to worries that Qatar Investment Authority may cut its 10 percent stake in the carmaker to boost liquidity after the Dubai government’s debt standstill request.

Miners Fall

Mining stocks fell, tracking lower metals prices. Gold prices fell back from a record high of $1,194.90, as the dollar rebounded from lows.

Rio Tinto, [RIO-LN 3051.00 -95.00 (-3.02%)] Xstrata, [XTA-LN 1054.00 -43.00 (-3.92%)] Lonmin, [LMI-LN 1765.04 -45.00 (-2.48%)] Anglo American, [AAL-LN 2607.00 -81.00 (-3.01%)] Kazakhmys [KAZ-LN 1249.00 -47.00 (-3.63%)] and Fresnillo were down between 2.8 and 4.1 percent.

Chilean copper miner Antofagasta’s fell 3.9 percent after nine-month core profit almost halved due to weak copper prices and a decline in output.

Crude futures fell 1.1 percent to trade near $77 a barrel. Total, ENI, BP, [BP-LN 582.445 -7.30 (-1.24%)] BG, Royal Dutch Shell, [RBSA-LN Unavailable ()] Repsol and StatoilHydro lost between 0.91 and 2.1 percent.

UK insurer Legal & General fell 4 percent, after Citigroup cut its rating to “sell” from “hold,” pointing to “strategic challenges.”.

U.S. markets, which rose to fresh 13-month closing highs on Wednesday, are shut for Thanksgiving Day.

Some analysts continued to point to the effect of stimulus measures being withdrawn, saying this will cause the market to suffer.

European Central Bank Governing Council member Axel Weber said central bank and government support cannot be increased further and is no substitute for a self-sustaining recovery.

source: cnbc.com

Tags: dubai bank problems, dubai banks, dubai recession

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