BEHOLD--THE BLACK CAMEL

REUTERS--Just when investors were settling down to lock in a few of the year’s profits and put their feet up for the end of the year holidays, a black camel has come waddling out of the desert to put everything on edge.

The unwelcome cygnus atratus came in the form of Gulf emirate Dubai telling creditors of Dubai World and property group Nakheel that debt repayments would be delayed. Fears of contagion spread widely, hitting world stocks, lifting the dollar out of its basement and driving demand for European debt so much that a roughly 6-month trading range for futures was breached.

TIMES OF LONDON: The value of British banking shares plunged by £13.7 billion today amid growing fears the UK financial sector could be heavily exposed to Dubai World, the state-owned conglomerate which yesterday asked for a standstill on its $60 billion (£36 billion) debt pile.

Investors had been hoping the British financial sector had worked through much its toxic debt, which included exposure to America's sub-prime mortgage market.

However, Credit Suisse estimates European banks are exposed to about half of Dubai's $80 billion borrowings, naming Barclays and Royal Bank of Scotland (RBS) as the UK lenders most at risk from the Emirates worsening debt problems.

The emergence of Dubai's financial problems now raises fears UK banks could face more writedowns on bad debts, and chimes with warnings earlier this week from Dominique Strauss-Kahn, the managing general of the International Monetary Fund, who said that global banks had only worked through half their toxic assets since the banking crisis broke two years ago.

WB7: Here's something to think about. These developments have conveniently occurred the day before a long weekend trading holiday in the US. All those hedge fund managers and traders with big EM exposure are going to be asking the same thing today: "Honey, where's the Malox?" While they pretend to be absorbed in today's game, they will also be worrying about how the Black Camel that roiled the European markets is a inconvenient metaphor for the Black Turkey haunting commercial real estate assets in the US.

"One London trader said: "Dubai is weighing heavily on the market, it has its fingers in so many pies that it could have a contagion effect and there are concerns another country could have problems on the back of this."

"He added that today's activity was very similar to when Lehman Brothers collapsed, warning that Dubai's problems could be the catalyst for the market to fall further."

OOOOUCH!!

Enjoy today's games.