Global, UAE markets: Investor focus shifts back to COVID-19

Dubai: With rising coronavirus infections in Europe denting market sentiment last week, concerns over resurgence in coronavirus cases will continue to play in investors mind in the days ahead.

With analysts cautioning against any news of further restrictions due to rise in COVID-19 cases – warning that it might not go well with investors in the coming week – equity markets are likely to be additionally guided by upcoming quarterly earnings data.

“Going forward, volatility will continue to remain high across global markets on the back of upcoming US elections and uncertainty over the third-quarter 2020 corporate earnings releases,” said Iyad Abu Hweij, managing director at Allied Investment Partners PJSC. “Moreover, the rising number of new cases will also make investors nervous and cautious about the recovery and earnings going forward.”

So going ahead, markets are likely to consolidate further as investors would keep a close watch on earnings announcements, rising COVID-19 cases globally, developments around the US election, alongside China’s GDP data, which will also be on the radar this week.

European nations are reviving curfews and lockdowns amid the growth in new coronavirus cases, leading to predictions of more demand destruction in the energy markets. India, which is on track to overtake the US with the world’s most COVID-19 infections, is bracing for a surge of cases in coming weeks as it heads into its main holiday season.

September volatility returns

The month of September had been rough for markets, correcting themselves after stocks surged the preceding month on hopes of an imminent global economic rebound to pre-pandemic levels. It has brought some volatility back to markets, which analysts say may stay for some more time.

Moreover, there were also signs of a delay to a potential COVID-19 vaccine after pharmaceutical giant Pfizer said last week that the drug it was developing with Germany’s BioNTech will probably not be available for emergency use until after the US presidential election, which is on November 3.

Furthermore, oil prices are drifting lower amid volatile trading seen all through last week. Regulators took the right steps at the start of the pandemic to stabilize prices, but analysts say more is going to have to be done in terms of monetary stimulus or the energy sector could face further destruction.

Oil worries plague UAE markets

UAE bourses started of the week in negative territory, as investor confidence takes a hit uncertainties on oil prices plagued the oil-dependent economies and their investors.

Dubai’s main share index (DFM) dropped 0.6 per cent, while the Abu Dhabi benchmark (ADX) slipped 0.2 per cent. Last week, the DFM had ended down 1.3 per cent, while the ADX gained 1.3 per cent.

Analysts were viewing how the worsening global oil demand outlook is expected to prompt the OPEC to reverse a planned easing of oil cuts in 2021. However, the GCC region’s largest bourse, Saudi Arabia’s Tadawul, and Qatar’s QSI index, rose 0.2 per cent each.

Market confidence goes topsy-turvy

Both the Dubai and Abu Dhabi bourses have been tracking sentiments seen in markets worldwide. Confidence has waned on the UAE benchmarks the past weeks, after growing increasingly upbeat in September and August, just like its peer global stock markets.

After dropping about 4 per cent in the month of May, the DFM rose 6 per cent in the month of June but slipped 0.5 per cent in July. Amassing bigger gains in August, the DFM gained 9.8 per cent in the month, but rose relatively just 1.2 per cent in September.

Tracking almost similar trends, the ADX slipped 2 per cent in May and rose 3.5 per cent in June but slipped 0.2 per cent in July. But the ADX gained 4.9 per cent in August, but stayed flat in September.