Global equities fell sharply Tuesday, accelerating earlier losses as traders were gripped by concerns about Dubai's debt crisis, and on signs that the global economy is still struggling after Federal Reserve Chairman Ben Bernanke's sobering assessment of the US economy. The Dow Jones Industrial Average dropped 104.30 points (1.00 percent) to 10,285.81 at the market close. The Nasdaq composite fell 16.49 points (0.75 percent) to 2,173.12 and the broad-market Standard & Poor's 500 index retreated 11.44 points (1.04 percent) to a preliminary close at 1,091.81. The market continued to react to Bernanke's signal in a speech Monday that essentially zero interest rates would be kept for some time amid a fragile recovery facing “formidable headwinds,” particularly from high unemployment and tight credit. “The Fed chair's speech has taken some of the wind out of the bulls' sails following a much stronger-than-expected November payrolls report” last Friday, said Joseph Hargett of Schaeffer's Investment Research. Sentiment in Europe was troubled by lingering concerns over Dubai's debt crisis and news that Fitch had downgraded its long-term credit rating on Greece, a heavily indebted member of the euro zone. The London FTSE 100 index shed 1.65 percent to close at 5,223.13 points while in Paris the CAC 40 lost 1.43 percent to finish at 3,785.30. The Frankfurt Dax gave up 1.66 percent and finished at 5,688.58 points. Elsewhere there were declines of 1.69 percent in Madrid, 0.96 percent in Brussels and 1.69 percent in Milan. The market continued to react to Bernanke's signal in a speech Monday that essentially zero interest rates would be kept for some time amid a fragile recovery facing “formidable headwinds,” particularly from high unemployment and tight credit. “It is apparent that Dubai's issues are not yet properly assessed, yet alone dealt with,” GFT analyst David Morrison said. “On top of this, Greece's credit downgrade brings other eurozone countries back into focus - Ireland and Spain - which has pressured the euro.” Morrison said traders were running for cover due to “concerns of a sovereign debt default.” European banking shares slid Tuesday as markets fretted about the sector's exposure to Dubai. At the same time, Greece was hit by a second blow to its credit rating on Tuesday, marking falling confidence in its economic policy, and raising the prospect of crisis budget measures and increasing strains in the euro zone. Credit rating agency Fitch downgraded Greek long-term debt ratings, hours after Standard & Poor's warned it could take the same step if the new socialist government did not take aggressive action to slash the huge public deficit. The news shook the Greek stock market Tuesday, which closed down 6.04 percent. European exchanges took a further battering from news that German industrial output shrank in October after two months of solid gains, dampening hopes of an industry-led recovery in Europe's largest economy. Output fell by 1.8 percent compared to the previous month, which was far worse than market expectations for a gain. In Asia on Tuesday, Japanese stocks closed 0.27 percent lower on Tuesday, taking a breather after a six-day winning streak. Moreover, Gulf stocks continued the downward trend on Tuesday as Dubai Incorporated debt issue drags. Stock markets in the United Arab Emirates took another beating Tuesday on negative sentiment from a debt crisis that has seen Dubai share prices plummet more than 20 percent in two weeks. The Dubai Financial Market index shed 6.12 percent to close at 1,638.05 points on Tuesday in a second straight day of losses after Monday's 5.84 percent drop. Also failing to shake off the downward trend was the Abu Dhabi Securities Exchange, which fell 3.36 percent to finish at 2,538.73 points for a second successive day of declines. Dubai's DFM index has now dropped by 21.7 percent from its close at 2,093.16 points before the announcement. Its Abu Dhabi counterpart has fallen 12.7 percent from 2,910.16 points over the same period. Among the hardest-hit Dubai stocks on Tuesday were giant developer Emaar Properties, which fell 9.84 percent, leading construction company Arabtec, down 9.86 percent, and Dubai Islamic Bank, which shed 9.91 percent. The three companies narrowly missed the maximum-allowed 10-percent drop. In Abu Dhabi, the construction sector dropped by 5.17 percent on Tuesday and the banking segment sagged 3.76 percent. Health care was the only segment to rise, edging up 0.27 percent. In addition to the two UAE exchanges, most other Gulf bourses decreased on Tuesday as well. Saudi Arabia's stock market, the largest in the Arab world, closed with a 2.30-percent decline at 6,102.62 points. The Saudi TASI index had also posted a loss of 0.99 percent on Monday. Qatar's exchange also lost ground on Tuesday, dropping 2.08 percent to 6,983.94 points. Qatar's index was, along with Oman's, one of two to rise on Monday, when it closed 1.06 percent higher. Oman's Muscat Securities Market also showed a decrease in Tuesday trading, falling 1.39 percent to 6,214.8 points, after closing up 0.32 percent on Monday. Bahrain's tiny exchange closed down 0.30 percent on Tuesday, at 1,424.20 points, following a decrease of 0.07 percent the day before. Kuwait's exchange was the only Gulf market to post an increase on Tuesday, ending 1.30 percent at 6,765.6 points. It had fallen 0.79 percent on Monday. Humam Al-Shamaa, a financial analyst at Al-Fajr Securities, said the drops were due to negative sentiment over the Dubai debt crisis. “The reasons behind the fall in the markets are psychological... selling dominates the market now, and it is likely to continue, mainly among individual local investors,” he said. He also noted the volume of trade was low because investors stayed away due to lack of confidence in the market. Meanwhile, oil prices fell more than $1 to below $73 a barrel on Tuesday, extending losses to a fifth straight session as the dollar strengthened and demand concerns weighed on prices. US crude for January delivery fell $1.31 to settle at $72.62, down $1.31. Oil has fallen $5.75, or 7.3 percent, since prices last rose on Dec. 1. In London, Brent crude fell $1.24 to settle at $75.19.
