In a positive turn of events, several major stock markets across the Gulf region experienced early morning gains on Tuesday. The surge in optimism arises from the anticipation of crucial interest rate decisions during the upcoming U.S. Federal Reserve policy meeting later this week.
As the Federal Reserve commences its two-day meeting, starting on Tuesday, market experts widely expect it to maintain the status quo by keeping policy rates unchanged. However, what truly captures the interest of investors is the message to be conveyed by policymakers. Their statements will provide insight into the future trajectory of interest rates, guiding investment decisions in the region.
For most Gulf Cooperation Council countries, including the UAE, their currencies are pegged to the U.S. dollar, and they closely monitor the Federal Reserve's policy adjustments. This direct link exposes the region to the far-reaching consequences of any monetary tightening actions undertaken by the world's largest economy, the United States.
Notably, Saudi Arabia's benchmark index, known as TASI, exhibited a remarkable 1% rise. This upward momentum primarily resulted from the impressive performance of Etihad Atheeb Telecommunication Co., with the stock (7040.S.E.) surging by a staggering 10%. The telecommunications company reported a net profit of 47.9 million riyals ($12.77 million) for the second quarter, significantly increasing from the 6.6 million riyals recorded a year ago.
In a related development, the World Bank made an insightful projection, expecting global oil prices to average $90 per barrel in the fourth quarter, decreasing to an average of $81 in 2023. This forecast is attributed to slowing global economic growth, which is anticipated to reduce demand. However, the World Bank warned of potential price spikes in the event of an escalation in the ongoing Middle East conflict.
Oil prices undeniably play a pivotal role in the financial markets in the Gulf region. In Asian trading, they rebounded after experiencing a more than 3% dip in the previous session. Concerns over supply disruptions triggered by the ongoing conflict in the Middle East fueled this resurgence, offsetting concerns over disappointing economic data from China.
In Dubai, the primary share index, represented as DFMGI, witnessed a modest gain of 0.2%. Notably, Emaar Properties (EMAR.DU), a prominent blue-chip developer, contributed to this upward movement with a 1.2% rise in its share price. Simultaneously, the index in Abu Dhabi (FTFDGI) added 0.3%, underscoring the general optimism in the Gulf region's stock markets.
However, it was not all rosy across the board, as the Qatari benchmark (QSI) experienced a slight decline of 0.5%. Notably, petrochemical manufacturer Industries Qatar (IQCD.QA) suffered a 3.5% loss in its share price, contributing to the overall dip.
In a contrasting yet related global development, Israeli troops, and tanks initiated an attack on Gaza's primary northern city from both the east and west on Monday. This offensive came three days after the commencement of ground operations in the Palestinian enclave. Tragically, the health ministry in Hamas-controlled Gaza reported that a total of 8,306 Palestinians have been killed, including 3,457 children, in Israeli strikes on Gaza since October 7, 2023. These distressing figures are a stark reminder of the ongoing Middle East conflict.
With global markets on the edge of their seats awaiting the Federal Reserve's upcoming decisions and amid Middle East tensions looming, investors are navigating a complex economic landscape, seeking stability and profitability in an ever-changing world.
Edited by: Sri Soudamini Konka
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