Emirate index dropped 4.49% after Emaar Properties announced it would pull out of merger with Dubai Holding subsidiaries

Dubai’s financial markets continued their downward spiral this morning as the decision to abandon a merger of its main property groups failed to rally confidence.

The emirate’s main index fell 4.49% in early trading at the end of a week of falls following huge losses at Nakheel and fears Dubai’s debt crisis had spread beyond Dubai World, which is restructuring $26bn of its debt.

Last night, Emaar Properties, whose projects include the Burj Dubai, announced it was pulling out of a merger with three of Dubai Holding’s other subsidiaries, Sama Dubai, Dubai Properties and Tatweer.

Observers had been dubious about the merger, which was due to take place by the end of the year, but the decision to scrap it has so far failed to improve investor confidence.