InfoTech: did LSE glitch prevent a new global meltdown?

This morning, European markets were stunned: yesterday, Dubai World, the driving force behind much of Dubai's spectacular construction and growth, held up its hands and for the first time admitted that it is in deep trouble.

The shockwaves proved that markets are still very nervous. Any company with a sizeable Middle East investment found its shares being dumped: everything from Porsche to Mercedes went south with the kind of speed usually reserved for their more heavy-right footed drivers.

But those exposed to Middle East investments found themselves subject to sell tickets, too.

UK banks - HSBC, Lloyds and RBS - led a downwards charge: they along with ING were leaders in a large syndicated facility last year. Despite little Middle East exposure, Standard Chartered was dragged down with them.

By 10:30 all were looking at multi-percentage drops.

Then the LSE broke down.

The LSE put order-driven securities into an auction call period, said Reuters quoting the LSE.

Soon after trading resumed the plunge began again: by 14:45 STAN, caught in the crossfire, was down almost 4.5% on the day; HSBA was around the same; RBS, already vulnerable and seeing losses all week, shed almost 6.5% - despite a spike during the closed session. Lloyds, which has had a much better time recently, was the least badly affected falling "only" 4%.

And then Sterling started to plummet against the euro, yen and USD.

The truth is that the evidence of problems in Dubai is everywhere from the abandoned cars at the airport, to the empty expat accommodation, the deserted shopping malls and the glorious and spectacular void that is the new Emirates terminal at Dubai airport.

But Dubai has been in denial: it has simply refused to accept that there is a problem even as people fled, as companies made them redundant and no one else would take them on. For a year, the confidence trick (in the nicest sense of the phrase) worked, at least so far as the outside world was concerned.

But yesterday, the myth became too difficult to sustain.

How much the situation has been made worse - or saved - by the fact that the US is closed for its annual Thanksgiving holiday remains to be seen. Gut reaction is that the closure will help prevent a global flight from banks - it has to be remembered that the US banking sector is in a much bigger mess than that in Europe and broken confidence would affect it more severely. That would run the risk of contagion across Asian markets tomorrow morning and still greater falls in Europe as Friday begins, leading, one suspects, to a panicky sell off in the USA, all matched with the usual end of month closing of positions.

With the exception of RBS, although there was volatility in the closed period, especially for Lloyds, the UK's four banks remained more or less steady whilst the LSE was broken.

The shares all fell for almost an hour after re-opening, but slight rises were apparent coming up to 15:00.

That suggests that the fall would have been greater if the market had kept trading.

Perhaps that broken system acted to prevent another bank-led collapse.