Markets rocked by Dubai World's debt problem

On Wednesday, Dubai World announced that it was trying to delay its debt payments. From Reuters:

Dubai will ask creditors of two of its flagship firms for a standstill on debt worth billions of dollars as a first step towards restructuring Dubai World, the conglomerate which spearheaded the emirate's breakneck growth.

The government's announcement on Wednesday, which also said consultants Deloitte had been appointed to help with the restructuring, sent the cost of insuring Dubai's debt against default soaring and bond prices tumbling.

Most of the reaction in global markets came on Thursday. From Bloomberg:

European stocks fell the most in seven months and bonds jumped as Dubai’s attempt to reschedule its debt rattled investors seeking higher returns in emerging markets. The dollar slid to a 14-year low against the yen.

Europe’s Dow Jones Stoxx 600 Index retreated 3.3 percent at 5 p.m. in New York as a gauge of volatility posted its steepest surge in a year. The Shanghai Composite Index slumped 3.6 percent, the largest drop since August, and Brazil’s Bovespa Index slipped 2 percent. Credit-default swaps tied to debt sold by Dubai rose as much as 135 basis points to 575 according to CMA DataVision. U.S. markets are closed today for the Thanksgiving holiday...

Bonds rose as investors fled to the relative safety of government debt. The yield on the 10-year U.K. gilt dropped 10 basis points to 3.52 percent. The 10-year German bund yield declined 10 basis points to 3.16 percent...

The yen climbed as high as 86.30 per dollar, the strongest since July 1995...

Crude oil for January delivery fell 2.2 percent to $76.23 a barrel in electronic trading on the New York Mercantile Exchange after a government report yesterday showed rising inventories. Gold for immediate delivery declined 0.3 percent to $1,188.38 an ounce in London, after touching an all-time high earlier today.