By Malcolm Morrison, The Canadian Press

TORONTO - New York stock markets closed lower Friday as investors considered the ramifications of a debt crisis that has hit Dubai.

The Dow Jones industrial averaged closed down 154.5 points at 10,309.9 at the end of a shortened session, but was well above early lows. The blue chip index was flat for the week, up a slight eight points.

Traders came back to work following the U.S. Thanksgiving Day holiday to deal with news that Dubai World, a government investment company, had asked creditors to postpone its forthcoming payments on US$60 billion in debt until May.

The Toronto stock market moved higher following a substantial loss on Thursday as investors hope that the debt crisis in Dubai will be contained and not stall a budding economic recovery.

"Really, after a pretty good dunking yesterday, the TSX is holding in quite nicely today," said Blair Falconer, portfolio manager at HSBC Securities Canada.

The S&P/TSX composite index rose 25.9 points to 11,462.7 following a 200-point tumble Thursday.

The Dubai announcement Wednesday stoked fears of a potential default and contagion around the global financial system, particularly in emerging markets. But a day later, investors were taking a harder look at what the Dubai debt fallout means.

"This is tantamount to a sovereign default and so that's what makes it a lot more serious than most," added Falconer.

He observed that investors felt better Friday knowing that Canadian financials have limited or no exposure to the Dubai debt and "also the fact that the European banks, which do have exposure, cleared the decks fairly quickly by saying here's what our exposure is."

"People were able to say OK, it's spread around fairly well; it's not one country taking a major hit; it looks OK."

The Canadian dollar was down a fifth of a cent to 94.1 cents US after a flight to the greenback had sent the loonie down 1.35 US cents on Thursday.

The financial sector was up 0.64 per cent with investors confident the Canadian banking sector won't be affected by the Dubai issue. Bank of Montreal (TSX:BMO) gained 50 cents to $53.15 while Royal Bank (TSX:RY) advanced 65 cents to $56.53.

Railway stocks took the industrials sector ahead 0.82 per cent, with Canadian National Railways (TSX:CNR) up 62 cents to $55.62. CN is meeting with the union representing 1,700 locomotive engineers, a day before the workers are scheduled to go on strike.

Commodities were also weaker, but well off early lows, with the January crude contract on the New York Mercantile Exchange falling $2.19 from Wednesday's close to US$75.77 a barrel. The energy sector was up 0.25 per cent.

The gold sector was off 1.72 per cent as bullion prices also gave up ground with the December gold contract on the Nymex down $15 to US$1,172 an ounce.

December copper was down seven cents to US$3.09 a pound and the base metals sector was off 0.75 per cent. Ivanhoe Mines (TSX:IVN) lost 48 cents to $12.51.

The TSX Venture Exchange moved 13.03 points lower to 1,406.34.

New York's Nasdaq composite index lost 37.61 points to 2,138.44 while the S&P 500 was down 19.15 points to 1,091.5.

The latest trouble on markets came as the U.S. kicked off the unofficial start to the holiday shopping season - coincidentally called Black Friday. Investors will be tracking news from retailers for insights into how much consumers will spend in the coming month. Consumer spending is the biggest driver of the U.S. economy.

European bourses advanced following steep losses on Thursday. London's FTSE 100 was 0.99 per cent higher, Frankfurt's DAX was ahead 1.27 per cent and the Paris CAC 40 was ahead 1.15 per cent.

In economic news, Statistics Canada says the country's current account fell to a record deficit in the third quarter to a seasonally adjusted $13.1 billion. The agency says the shortfall was largely due to a $4-billion deficit in the exchange of goods, as imports outstripped exports.

On the corporate front, Mosaid Technologies Inc. (TSX:MSD) said Thursday it earned $5 million or 49 cents per diluted share for the quarter ended Oct. 31 compared with a loss of $3.4 million or 33 cents per diluted share a year ago. Revenue in the quarter totalled $17.3 million, up from $13.8 million. Its shares ran ahead 82 cents to $18.68.

Canwest Global Communications (TSXV:CGS) says overall revenue in its latest quarter fell to $624 million, down 13 per cent from a year earlier. The media company has put its conventional television operations under court protection while working out a restructuring plan with creditors.

Canwest's net loss for its fiscal fourth quarter was reduced to $111 million from $1.02 billion a year ago, when the company recognized a number of extraordinary expenses. Its shares on the Venture exchange drifted half a cent lower to 7.5 cents.