LONDON, Nov 26 (MNI) On this Thanksgiving Thursday, the focus has been almost exclusively on the events in Dubai late yesterday and the potential knock on effects. The move to a "standstill agreement" for 6 months with creditors by Dubai World is still a slight mystery to some market participants, as the fund was arguably still able to tap other avenues for credit while it restructured itself. The issue for markets, though, is whether or not this will open a can of worms with respect to real estate losses in the area.

The immediate reaction has been for banks with the most exposure to the region to sell off, until there is more clarity on how Dubai World intends to restructure the business. A team of outside consultants has been flown in to advise on the company's various different business activities.

Spreads in the Government of Dubai have now hit 570 basis points, approximately 130bps wider again today, after widening over 100bps yesterday. Banks with the highest exposure to the region have also seen sharp widening this morning, compounding the underperformance of the financial sector from earlier in the week. HSBC is 3bps wider at 58bps, Standard Chartered 9bps wider at 74bps and Barclays 5bps wider at 87bps. Other higher beta benchmarks related to the sector are well over 10bps wider. Xover is 13bps wider at 527bps, HiVol 3bps wider at 137bps and Europe 3bps wider at 87bps. Financial seniors are 5bps wider at 84bps and Financial sub is 10bps wider at 155bps.

The news has somewhat overshadowed the dramatic fall in the dollar last night, which arguably would have been greater if it were not for Dubai. The dollar slump has pushed base metal prices higher, but it seems that the currency's plight has reached a point where investors may have to reassess long term strategy with respect to dollar holdings as, if the break of Euro-dollar 1.50 is sustained, many analysts expect another sizable leg lower in the dollar through the next few weeks. This raises questions as to how the Fed will deal with the inflationary consequences, even though dollar weakness will cushion asset price depreciation in the country to a degree.

In consumers, DSG International released first-half results this morning, reporting underlying revenue down 1% to Stg3.33 billion, with an underlying loss before tax of Stg17.6 million versus a loss of Stg17.7 million last year. The total loss before tax after deducting non-underlying charges of Stg5.5 million was Stg23.1 million versus a loss of Stg55.6 million last year. The underlying loss for the period was Stg6.3 million with a total loss of Stg19.2 million.

From a divisional point of view, UK & Ireland Electricals, which comprises Currys, CurrysDigital and Dixons Travel in the UK and Currys and PC World in Ireland, reported an 8% fall in total sales to Stg1.044 billion versus Stg1.138 billion last year, with like-for-like sales down 9%. The first-half underlying operating loss was Stg23.2 million versus a loss of Stg22.3 million last year. UK Computing which comprises PC World, DSGi Business and The TechGuys, reported that total sales were down 17% at Stg580.8 million, with like-for-like sales down 15%. Underlying operating profit was Stg7.2 million versus Stg11.7 million last year.

In the Nordic region, Elkjop saw sales grow by 16% at constant exchange rates, while in sterling, sales grew by 22% to Stg797.8 million. Like-for-like sales were up 11%, with underlying operating profits at Stg39.1 million. The other international division comprises operations in Italy, Greece, Spain, Turkey, Czech Republic and Slovakia. Total sales declined by 11% at constant exchange rates and by 3% in sterling to Stg586 million. Like-for-like sales were down 5%, with an underlying operating loss of Stg7.7 million.

The e-commerce division comprises PIXmania and Dixons.co.uk and had total sales of Stg324.4 million, with an underlying operating profit of Stg2.7 million versus Stg1.0 million last year. Looking forward, the Group said that although the economic backdrop for 2010 remains uncertain, it is well prepared with a focus on managing costs, margins, stock turn and cash flow alongside the continued rapid progress of the Renewal and Transformation plan. Shares in DSG were up 0.74p, trading at the 37.31p level, with CDS spreads tighter trading around the 800 bps level.

In utilities, Veolia Environnement announced it may shelve its plan to sell a 49% stake in its UK water business, as bids for the unit have fallen far short of expectations. The unit as a whole is reportedly valued at $800 million and is part of Veolia's restructuring strategy, where it aims to sell approx E3 billion of assets to reduce debt.

The UK business valuation may have been adversely impacted by the proposal by UK regulators to cap customer charges over the next 5 years, according to analysts. Asset sales so far from the program are on target, according to the company, at E1 billion. Veolia's CDS was 1bps wider today at 81.5bps.

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