Dubai Defaults – Deflation In Action – Watched Pot Theory Revisited
1009-11-29 Mish’s Global Economic Blog
Global stock markets endured heavy selling on Thursday as investors were spooked by the spectre of a default by Dubai and after a febrile foreign exchange market saw the yen surge to a 14-year high against the dollar.
The turmoil caused a flight to less risky assets. Gold, which had challenged $1,200 in Asian trading, fell back from its highs and money flowed into havens such as German government bonds.
US markets are closed for the Thanksgiving holiday, but electronic trading of the benchmark S&P 500 equity futures contract showed a potential drop on Wall Street of 2.2 per cent.
As the European trading day progressed it became clear it was Dubai World’s difficulties that had hit a particular nerve, reminding investors of the lingering damage wrought by the financial crisis.
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