All about business

Shares in banks, builders and companies part-owned in the Middle East fell around the world on Thursday and investors sought safety in government bonds on worries about Dubai’s ability to pay its debts.

Sterling fell as exposure focused on UK banks, and euro zone government bond futures hit their highest level since late April, breaking out of the trading range that has been in place since June as risk aversion prompted by the crisis kicked in.

“The Dubai story is weighing heavily on stock markets and people are looking to safe-havens so there’s some flight to quality again,” said Charles Berry, a trader at LBBW.

The euro broke above 91 pence for the first time in a month to hit a high of 91.29 pence.

“There are concerns regarding the extent of the exposure of the UK banks to Dubai, hence sterling is coming under pressure,” said Ian Stannard, currency strategist at BNP Paribas.

European bank shares fell over 3 percent on concern about potential exposure. Dubai said on Wednesday that two of its key firms, Nakheel and Dubai World, plan to delay repayment on billions of dollars of debt.

Companies where Middle Eastern investors own big stakes, such as the London Stock Exchange were also hit by concern the holdings could be cut to meet obligations at home.

By 1020 GMT the DJ Stoxx European bank index .SX7P was down 3.5 percent at 221.7 points.

The fall was led by HSBC, Standard Chartered, Barclays, Deutsche Bank and Royal Bank of Scotland, whose shares all fell over 4 percent.

In Seoul, shares in construction issues fell, with Samsung C&T leading losses as investor concerns focused on Dubai’s once booming construction sector.

A Samsung C&T spokesman said that the company was currently working on a $350 million project awarded by Nakheel in 2007.

“So far, we have not had any problems with the project,” he said.

Shares in Hyundai Engineering & Construction were down 4.41 percent and Samsung Engineering fell 2.16 percent as of 0458 GMT.

Nakheel’s NAKHD.UL Islamic bond prices extended losses, falling 12 points to 72, their lowest since February, according to Reuters data.

DEBT DELAY 

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