Europe's Dow Jones Stoxx 600 Index retreated 1.9 percent at 12:02 p.m. in London. The Shanghai Composite Index slumped 3.6 percent, its biggest drop since August. Credit-default swaps tied to debt sold by Dubai rose as much as 131 basis points to 571 according to CMA DataVision. U.S. markets are closed Thursday for the Thanksgiving holiday.

Dubai World, the government investment company burdened by US$59 billion of liabilities, roiled markets around the world Wednesday by seeking to delay repayment on much of its debt. The dollar's slump to a 14-year low against the yen prompted Finance Minister Hirohisa Fuji to say Japan's government is watching currencies “very closely,” while traders said the Swiss central bank sold the franc after it climbed to the highest value against the euro since June 24.

“Dubai isn't doing risk appetite any favors at all and the markets remain in a vulnerable state of mind,” said Russell Jones, head of fixed-income and currency research in London at RBC Capital Markets. “We're still in an environment where we're vulnerable to financial shocks of any sort and this is one of those.”

The Dubai announcement drove up the cost of protecting emerging-market sovereign debt against default. Contracts linked to Saudi Arabia climbed 18 to 108, while Bahrain rose 30.5 to 225, CMA prices show. Debt swaps linked to Abu Dhabi government bonds increased 18.5 to 155, Vietnam rose 39 to 252, Indonesia climbed 27 to 229 and Russia added 13 to 205. Credit- default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements.

Vietnam's dong, the world's worst-performing currency, declined 3.3 percent against the dollar to a record low after the central bank devalued the currency to curb inflation. South Africa's rand weakened 1.1 percent against the dollar as gold declined. The Turkish lira slumped 1 percent versus the greenback, and Hungary's forint lost 1.1 percent per euro.

Russia's Micex Index fell 2 percent as commodities retreated. The MSCI Emerging Markets Index of 22 developing nations fell 1.1 percent.

European bonds rose as investors fled to the relative safety of government debt. The yield on the 10-year U.K. gilt dropped 5 basis points 3.58 percent after falling to the lowest level in more than a month. The 10-year German bund yield declined 7 basis points to 3.20 percent, the lowest level in more than three weeks.

Stocks fell from Shanghai to Tokyo and London. The MSCI Asia Pacific Index retreated 0.5 percent as Chinese banks dropped on concern they need to sell more shares to fund demand for loans. Bank of China Ltd., which said this week it's studying options to replenish funds, declined 2.9 percent.

China Minsheng Banking Corp. became the first Chinese lender in four years to fall in its Hong Kong trading debut. The nation's first privately owned lender slipped 3.1 percent after raising HK$30.1 billion (US$3.9 billion) this month in the territory's biggest public share sale since April 2007.

Japan's Nikkei 225 Stock Average fell to a four-month low as the dollar's decline against the yen dimmed the earnings outlook for makers of electronics and cars. Canon Inc., the world's largest maker of cameras, fell 2.1 percent in Tokyo. The company gets 28 percent of sales from the Americas. Toyota Motor Corp., the world's biggest carmaker, slid 1.2 percent.