Dubai, the Dow and Everyone Else

Thanksgiving took on a certain element of Halloween this year. You had a treat, what with the fine food and good times Thanksgiving is known for. Then there was the trick, one that got sprung the day before in Dubai.

While Americans gathered around their dinner tables, nervous global markets ducked under theirs. Fears about Dubai’s request that banks suspend Dubai World’s debt repayments for six months led to market drops in London, Paris and Frankfurt. Today, a light trading day following Thanksgiving, the Dow lost 154 points.

It could have been worse, the analysts tell us. After all, when the Dow opened Friday, it quickly lost 224 points. The Wall Street Journal’s Emily Barrett noted how U.S. banks hadn’t taken a big hit (yet). “There’s little sign yet that the anxiety over European exposures to the emirate’s long-standing debt problems will reverberate powerfully this side of the Atlantic,” she wrote today.

Still, there’s a clear feeling that once Thanksgiving’s triptothan coma wears off by Monday, more damage will be done. "The impact of the upheavals in Dubai extends far beyond the middle eastern emirate. Indeed, it may be the beginning of the end of the global risk trade, if it isn't over already,” Barron’s Randall W. Forsyth wrote today.

In an ironic piece of timing, Dubai World—the Dubai government’s investment vehicle—was due for some major U.S. publicity next week as the massive CityCenter project in Las Vegas opens its first phase. DubaiWorld owns half of the $8.5 billion casino project which has been troubled with its own financial issues and the global economic downturn.

MGM-Mirage, Dubai World’s partner in Las Vegas, said CityCenter would not be affected by its partners debt issues. "CityCenter is fully funded, on schedule and ready to begin welcoming guests starting next week," MGM representative Yvette Monet said in a statement.