TORONTO - The Toronto stock market closed sharply lower Thursday amid news from Dubai that the government's flagship investment company is in deep financial trouble.

The S&P/TSX composite index dropped 200.1 points to 11,436.8 after the Dubai government said it would restructure Dubai World, which has developed a slew of extravagant real estate projects and is thought to have debts totalling around US$60 billion. It also announced a six-month standstill on repayments of its massive debt.

The Dubai government's announcement came after the local stock market closed and at the start of the Eid holidays, during which most offices will remain shut until Dec. 6.

"And just before American Thanksgiving too," said Doug Porter, deputy chief economist at BMO Capital Markets. "I mean it's really like they were trying to slip in under the radar to some extent."

Porter noted that Dubai World posed a special risk because of the very high level of debt the sovereign fund had taken on.

"I think this was a special circumstance -- and I don't think it should raise . . . major concerns about the risks of other sovereign entities. I don't think this casts a cloud on all emerging markets by any means," he said.

U.S. stock markets were closed for the Thanksgiving holiday.

The TSX Venture Exchange was down 15.78 points to 1,419.37.

The Canadian dollar was caught up in an investor flight to safe havens, such as the U.S. dollar, and fell 1.35 cents to 94.3 cents US.

The TSX financial sector sustained the biggest losses, down 1.7 per cent. But banks outside Canada are the biggest creditors, including Abu Dhabi Commercial Bank and Emirate NDB PJSC. Other lenders include Credit Suisse Group, HSBC Holdings, Barclays, Lloyds Banking Group and Royal Bank of Scotland.

In Toronto, Manulife Financial (TSX:MFC) and Fairfax Financial (TSX:FFH) both issued statements saying they do not have exposure to Dubai World. A source close to Sun Life Financial (TSX:SLF) said the insurer also doesn't have exposure. Manulife was off 10 cents at $18.50 and Sun Life down 30 cents to $29, while Fairfax gained 49 cents to $368.

Elsewhere, TD Bank (TSX:TD) gave back $1.34 to $65.84 and Royal Bank (TSX:RY) lost $1.32 to $55.88.

Although New York commodity exchanges were closed, oil and metal prices also moved lower in electronic trading following the Dubai announcement. The base metals sector was down 2.66 per cent while December copper edged seven cents lower late Thursday afternoon to US$3.09 a pound. Teck Resources (TSX:TCK.B) moved down $1.04 to $36.44, while HudBay Minerals (TSX:HBM) stepped back 44 cents to $14.60.

Late in the afternoon, the January crude contract in New York lost $1.73 to US$76.23 a barrel, taking the energy sector down 1.9 per cent. Suncor Inc. (TSX:SU) declined 93 cents to $38.01 and Canadian Natural Resources (TSX:CNQ) lost $1.70 to $70.80.

The December bullion contract moved up $5.80 from Wednesday's latest record close to US$1,192.8 but the gold sector backed off 1.18 per cent. Goldcorp Inc. (TSX:G) faded $1.42 to $45.10.

All TSX sectors were lower with the industrials group down 1.97 per cent. Bombardier Aerospace (TSX:BBD.B) said it will lay off an additional 715 workers in its Montreal-area facilities as it reduces production of its CRJ regional jets. The company says a tough economic and airline industry environment make it difficult to gain new aircraft orders and its shares moved 18 cents lower to $4.60.

The telecom sector declined 1.04 per cent with Rogers Communications Inc. (TSX:RCI.B) shares down 49 cents to $32.26 as it announced it's laying off about 900 employees across Canada, mostly in executive and management positions, in an effort to streamline operations as it grapples with intensifying competition. It also said it is spending $163 million to increase its stake in Canada's fourth-largest cable company, Cogeco Cable Inc. (TSX:CCA) and its parent Cogeco Inc. (TSX:CGO). Cogeco cable shares ran ahead $1.66 to $35.10 while Cogeco Inc. shares gained $1.86 to $27.

The news of those layoffs came as the Conference Board of Canada reported that its index of consumer confidence decreased for a second consecutive month in November, falling 5.7 points to 79. The private-sector group said that "the outlook for future job creation remains a significant detractor to consumer confidence."

Overseas markets were rattled by the Dubai World development as the Shanghai index tanked 3.6 per cent, Hong Kong's Hang Seng shed 1.8 per cent and Japan's Nikkei 225 stock average fell 0.6 per cent.

London's FTSE 100 index fell 3.18 per cent and Frankfurt's DAX dropped 3.25 per cent.