Last week's announcement that state-owned Dubai World would delay payments on its debt was a proverbial bucket of cold water on risk appetite and world markets corrected markedly, fearing further contagion losses to global credit institutions. Since then the UAE's central bank made a statement saying that it stood behind the nation's banks and that it was opening an emergency three-month lending facility for them. Today, the director general of the Dubai Department of Finance has caused further market unease by stating that the government will not bail-out Dubai World or its real estate developer Nakheel and that creditors must take responsibility. He did however state that markets had overreacted to last week's announcement, calling the restructuring a wise decision. European indices are trading around -1.0% in the red as we approach the opening of the U.S. session and EURUSD, the global risk barometer, has been slipping towards 1.5000 after topping at 1.5082 overnight.

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