WHISTLING PAST THE GRAVEYARD

LONDON (Dow Jones)--European stocks fell sharply and bond spreads widened Thursday after Dubai World's request for a standstill on its debts. The giant holding company is owned by the government of Dubai and grew fast while accumulating liabilities of about $60 billion during the boom.

The following is a summary of coverage of Thursday's events and reaction:

DUBAI BANKS: Dubai banks Emirates Bank International PJSC (EBI.AI), National Bank of Dubai (NBL.EDH) and Mashreqbank PSC (MASQ.DFM) and the Dubai Islamic BankPJSC (DIB.DFM) have all been put on credit watch by Standard & Poor's rating agency after the city state's largest corporate entity, Dubai World, asked creditors for a six-month standstill on debt repayments.

EUROPE BANKS: European banks face potential losses on an estimated $40 billion in exposure to Dubai after Dubai World asked creditors for a six month standstill on debt repayments, raising fears that recent signs of improvements in banks' bad debt levels could reverse and Dubai's problems could weigh on the global recovery.

ASIA: The shock from Dubai World's restructuring and call for a standstill on its group debts spilled over into Asia Thursday, with global Islamic bonds issued out of the region weakening sharply.

People in the market linked the selloff, particularly in the sukuk of the Indonesian government and Malaysia's national oil company Petronas, to the debt-laden city-state's surprise announcement Wednesday, but many were convinced it was a knee-jerk reaction.

DUBAI DEBT: The cost of insuring sovereign debt issued by Dubai increased again early Thursday, according to data provider CMA.

It now costs $570,000 to insure $10 million of Dubai sovereign debt against default for five-years, up from $440,000 at Wednesday's New York close.

The cost of insuring emerging-market sovereign debt also rose markedly, as the fallout of Dubai World's restructuring announcements and Vietnam's decision to revalue the dong weighed on risk appetite.

MARKETS: The dollar is still rising after midday in Europe, driven both by fear of a debt default by Dubai World as well as talk of intervention by the Bank of Japan and suspected intervention by the Swiss National Bank. European stocks fell sharply.

SAUDI: Gulf International Bank, or GIB, said it was postponing its planned dollar-denominated bond issue after news that the government of Dubai was restructuring Dubai World. In a statement, merchant bank GIB, which is 97.2%-owned by the government of Saudi Arabia, said the decision was "made in the best interests of investors participating in the deal" and that it will "continue to monitor markets in the future to access funding opportunities."

DP WORLD: Dubai started to untangle the $60 billion financial mess of its once prized Dubai World conglomerate by ring-fencing its profitable ports unit. DP World (DPW.DIF) will be excluded from the debt standstill and restructuring of Dubai World and its subsidiaries, the ports operator said in a statement posted on the Nasdaq Dubai Web site. DP World, which operates the Middle East's largest container port, is considered the best assets within the Dubai World conglomerate. Most of the company's problems appear to stem from its troubled real estate unit Nakheel, which borrowed heavily to build vast property projects including Palm shaped residential islands in the Gulf.