Dubai Suffered worse in Economic climate!

Royal Bank of Scotland Group Plc, which was Dubai World’s biggest loan arranger since January 2007 according to JPMorgan Chase & Co., climbed 5.2 percent, having plunged to a seven- month low yesterday. Volkswagen AG, Europe’s largest carmaker, led auto stocks higher after the Stoxx 600 Automobiles and Parts Index sank 4.3 percent yesterday.

The Stoxx 600 gained 1.2 percent to 242.6, having plummeted the most since April yesterday amid concern Dubai’s proposal to delay debt payments may trigger the biggest sovereign default since Argentina in 2001. The gauge erased an earlier drop of as much as 1.8 percent today amid speculation the sheikhdom’s neighbors in the United Arab Emirates may come to its aid.

“There has been a lot of digging around and people are now of the opinion that what is going on in Dubai can probably be solved within the U.A.E.,” said David Hussey, London-based head of European equities at MFC Global Investment Management, which oversees about $250 billion. “Abu Dhabi is probably in a position that they can bail out Dubai. Banks that have reported so far have also said their exposure is fairly manageable.”

Dubai World, with $59 billion of liabilities, will ask all creditors for a “standstill” agreement as it negotiates to extend maturities, Dubai’s Department of Finance said on Nov. 25. Moody’s Investors Service said it would consider the plan a default should bondholders be forced to accept the terms.

The sheikhdom, which borrowed $80 billion in a four-year construction boom to transform its economy into a regional tourism and financial hub, suffered the world’s steepest property slump in the first global recession since World War II. Home prices fell 50 percent from their 2008 peak, according to Deutsche Bank AG.