Commodities Drop as Emerging-Market Stocks Fall on Dubai Debt (Mark Gilbert and Paul Sillitoe)

Nov. 27 (Bloomberg) -- Commodities dropped the most since July, emerging-market stocks fell, Treasuries and the dollar rose and credit default swaps surged as Dubai’s attempt to delay debt repayments unnerved investors.

The MSCI Emerging Markets Index of 22 developing countries slipped 2.6 percent at 12:17 p.m. in London, the most since Oct. 28. U.S. stock-index futures dropped and Europe’s Dow Jones Stoxx 600 Index fluctuated between gains and losses. Ten-year Treasury yields declined eight basis points. The yen rallied as much as 2 percent against the dollar before trading little changed on speculation Japan may act to curb gains. Credit- default swaps tied to debt sold by Dubai rose 134 basis points to 675, according to CMA DataVision.

“Emerging markets could suffer the most because we saw the biggest gains there,” said Henrik Drusebjerg, a senior strategist at Nordea Investment Management in Copenhagen, which oversees $220 billion. “We are one month short of finalizing 2009, so you could see quite a substantial amount of investors cutting any potential losses now. The doom scenario is that this could revive the whole financial crisis.”

Dubai World, the government investment company burdened by $59 billion of liabilities, sought this week to delay repayment on much of its debt. The yen pared its advance after Japan’s Finance Minister Hirohisa Fujii said he may contact the United States and Europe to act on currencies, signaling concern that the yen’s ascent will hurt the economy by crimping exports.

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