Dubai's Ruler Seeks to to Ease Debt Crisis Concerns

Dubai is seeking to delay payments on less than half its $59 billion of liabilities, easing the potential damage to banks recovering from $1.7 trillion of losses and writedowns from the global crisis. Shares worldwide recovered some of the losses suffered since Dubai announced it would seek a “standstill” agreement on all of Dubai World’s debt as the Dow Jones Euro Stoxx 600 gained 1.2 percent and the MSCI Emerging Markets Index showed the first back-to-back gains in two weeks , Bloomberg reports .

Meanwhile, s tocks in the Gulf region tumbled for a second straight session Tuesday as anxiety over Dubai's debt crisis spread to Qatar and Kuwait.

In a public statement, Dubai's ruler stressed federal unity across the U.A.E. amid concern that oil-rich Abu Dhabi will remain on the sidelines as it struggles to restructure the debts of its government-owned companies.

The comments did little to soothe investor nerves.

"The Dubai situation has in a way given traders a perfect way to highlight just how fragile market confidence is at the moment," said Ian Griffiths, a dealer at CMC Markets.

The Dubai Financial Market's main index closed down 5.6% Tuesday, after falling 7.3% the previous day. A total of $5 billion has now been wiped off the value of the bourse over the past two sessions.

Abu Dhabi stocks closed down 3.6%, while shares in Qatar and Kuwait were also hit, with benchmark measures down 8.3% and 2.7% respectively.

Investors remain edgy about the immediate outlook for the Gulf region after Dubai World said it is in talks with banks to restructure about $26 billion in debt.

Regional sentiment has been hit hard by concerns that the government-owned investment arm could default on some, or all, of its financial obligations.

"U.A.E. markets are down again on continued concerns about Dubai's debt, despite some clarification from Dubai World earlier on its restructuring plans," said one trader at EFG Hermes. "Other Gulf markets are also being impacted by this news as investors worry about the contagion from Dubai's debt woes," he added, The Wall Street Journal reports.

In the meantime, Abu Dhabi's ruler and President of the U.A.E. tried to ease concerns Tuesday that Dubai's debt crisis could undermine the country's economy. His comments fell short of an unequivocal statement of financial support for Dubai's struggling companies.

"We would like to comfort everyone that our country today is stronger and better, and that our economy and society are healthy," said Sheik Khalifa bin Zayed Al-Nahayan, who is also a cousin of Dubai's ruler. His statement to the official Emirates News Agency comes ahead of National Day holiday in the U.A.E. on Dec. 2.

"There's bound to be some breakage with investors," said Brij Singh, founder and chief executive of Baer Capital Partners, an investment management andcorporate finance firm with offices in Dubai, Mumbai and London. "The situation is manageable, it just needs to be managed , " The Wall Street Journal reports.