Markets continue slump ahead of Fed cut

MARKET TURMOIL: Gulf stocks have slumped on concerns the US will slash rates again this week. (Getty Images)

Markets across the Gulf fell on Sunday on concerns the US Federal Reserve will again slash rates when it meets on Tuesday, forcing central banks in the region to tighten their own lending rates and fuelling inflation.
 
Saudi Arabia’s main index followed Saturday’s poor performance by shedding another 0.39% to end on 9,657.93 points. Leading the drop were Al Rajhi Bank and Saudi Telecom Company (STC), which fell 1.58% and 1.48% respectively.
 
Inflation in Saudi hit a 27-year high of 7% in January, leaving the economy on edge ahead of Tuesday’s interest rate decision by the Fed.
 
In the UAE, where inflation is running at a 19-year high of 9.7%, both major indexes finished down.

Property developers in the UAE, which are heavily exposed to inflation due to the cost of imported materials and foreign labour, led the drop.
 
Emaar Properties fell 2.1%, pulling the Dubai's main index down 1.36% to finish on 5,675.47 points, while Sorouh Real Estate and Aldar Properties fell 1.44% and 1.39% respectively to drag Abu Dhabi’s benchmark index down 1.07% to 4,681.97 points.
 
“Markets are witnessing instability and investors are worried because of yesterday's fall in Saudi shares,” said Alaa El Din Moustafa, chief dealer at EFG-Hermes.
 
“Saudi Arabia, like the UAE, has the same issue that its currency is linked to the US dollar, so investors want to wait and see what happens in the US economy.”
 
In Bahrain, where inflation is running around 4.6%, it was Bahraini telecom Batelco that dragged the main index down to finish on 2,829.86 points for the day.
 
Ithmaar Bank and Al Khaleej Development Company also contributed to losses in Bahrain, finishing down 1.4% and 1.2% respectively.
 
Qatar, which suffers the highest inflation in the gulf at 14%, also posted the worst performance of all the regional markets.

Banks led the slide, with Commercial Bank of Qatar (CBQ) and Qatar Islamic Bank (QIB) both plummeting more than 5% to drag the benchmark 1.81% lower to close at 10.193.82 points.
 
Oman also followed the regional trend, with the main index ending falling by 3.4% to end the day at 10,725.53 points. Oman’s inflation rate sits around 8.3%.
 
Bucking the trend was Kuwait, the only GCC state to have severed ties with the US dollar. Kuwait’s main index closed higher for the fourth consecutive session, aided by National Industries Group and Al-Ahli Bank.
Both finished the day up with National Industries gaining 1.98% and Al-Ahli nudging 1.3% higher.
 
Kuwait, which announced on Sunday that it would again let its dinar appreciate against the US dollar, saw its main index rise 0.13% to 14,289.30 points.
 
Since deppeging from the greenback in May last year, the Kuwaiti dinar has appreciated 8%.

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