Abu Dhabi: A better than expected employment report in the US and anticipation Germany, France and rest of the Eurozone would act swiftly and decisively to end their lingering sovereign debt crisis in their own best interests is likely to boost sentiment on the region's stock markets this week, although the upside is going to be limited, say analysts.
The regional markets will also draw comfort from surging global oil prices, which have returned to the $100 per barrel mark, boosting the coffers of the exporting countries.
On Friday, crude oil for January delivery rose 76 cents to $100.96 a barrel on the New York Mercantile Exchange, the highest settlement since November 16. Prices advanced 4.3 per cent last week and are up 10 per cent this year. Brent oil for January settlement rose 95 cents, or 0.9 per cent, to $109.94 a barrel on the London-based ICE Futures Europe exchange.
"The markets hope that the German government is just negotiating by blocking any move to transform the European Central Bank into a lender of last resort. The Germans are thought to be trying to extract concessions from the indebted and troubled Eurozone countries. However the entrenched position of the German government is starting to backfire," wrote Gary Dugan, Chief Investment Officer — Private Banking, Emirates NBD in a research note. "Investors should make sure they have a significant buffer of cash to protect themselves from further downside in markets," Dugan added.
He also said the UAE markets have fallen to year lows and volumes have petered out to some of the smallest of the year. Markets will be unnerved by developments in Egypt.
"That leaders around the world are behaving with an increasing recognition of the severity of the situation is a good sign. For now, however, the most significant near-term threat to the global economy — the problems of debt and contagion in the Eurozone — continues to grow," said Pradeep Unni, Senior Relationship Manager at Dubai-based commodities trading firm Richcomm Global Services DMCC.
