As the world anticipates crucial economic data - specifically US consumer prices - most Gulf markets posted mixed gains at the start of this week. This performance reflects the influence of global stocks after a challenging period for investors, driven by fears of a US recession.
Most Gulf stock markets closed at the beginning of the week with increases ranging between 2 and 0.2 percent, supported by positive economic data last week, and the statement of some policymakers in the US Federal Reserve that they may reduce interest rates next September, according to Reuters.
In a statement to Asharq Al-Awsat, the Head of Asset Management at Arbah Capital, Mohammed Al-Farraj, explained that the recovery of Gulf markets is driven by several factors. Chief among them are expectations of improved global economic performance, supported by central banks in many countries easing monetary policies.
Additionally, the region is benefitting from rising oil prices, increased foreign investment inflows, and improved financial conditions for companies, he remarked.
Al-Farraj stressed that the performance of Gulf markets in the coming period will be affected by US inflation data, which will be a decisive factor in determining the course of interest rates.
For his part, Chief Economist at Riyad Bank, Dr. Nayef Al-Ghaith, told Asharq Al-Awsat that expectations of the Federal Reserve’s decisions in September and the rest of 2024 depend largely on the economic data, such as inflation rates, unemployment, and GDP growth.
“Central banks in the Gulf countries often follow the movement of the Federal Reserve due to the peg of their currencies to the dollar. Therefore, any change in US interest rates could be reflected in borrowing costs and deposits in Gulf banks,” he remarked.
According to Reuters, three Federal Reserve policymakers expressed confidence on Thursday that inflation had decreased sufficiently to warrant a reduction in interest rate. This news, combined with a larger-than-expected drop in US unemployment claims, contributed to a market recovery.
The US Department of Labor reported a 17,000 decrease in initial claims for government unemployment benefits, bringing the total to 233,000 seasonally adjusted claims for the week ending Aug. 3. This decline marks the largest drop in about 11 months.
