Stock futures signal sharp drop on Dubai jitters

Black Friday kicks off today and the futures are not indicating a good start to the trading session. How much of this is in anticipation of weak retail sales remains to be seen.

U.S. stock index futures pointed to a sharp drop when Wall Street reopens on Friday for half a session following Thanksgiving, as fears over Dubai’s debt woes knocked stock markets around the world.

At 1019 GMT, futures for the S&P 500 were down 1.9 percent, Dow Jones futures down 2.5 percent and Nasdaq 100 futures down 2.6 percent.

Dubai, part of the oil-exporting United Arab Emirates, said on Wednesday it would ask creditors of state-owned Dubai World and Nakheel to agree to a standstill on billions of dollars of debt as a first step toward restructuring.

Dubai World, the conglomerate that led the emirate’s expansion, had $59 billion of liabilities as of August, most of Dubai’s total debt of $80 billion. Nakheel was the builder of three palm-shaped islands off Dubai.

Investors continued to dump risky assets on Friday, spooked by the risk that a Dubai debt default could revive the financial turmoil of the credit crisis.

“The Dubai concerns are an issue but not a real shock. It’s more a question of timing with the lack of market participants due to Thanksgiving holiday yesterday and the Muslim Eid holiday today exaggerating the moves,” Mic Mills, senior trader at ETX Capital, in London.