Dubai: The first two weeks of 2020 saw equity markets rally after the world’s top two economies put an end to about 18 months of escalating rivalry over trade, but the tensions are not seen lifting just yet.
Global equity markets have been on a positive trajectory as investors were encouraged by the signing of a phase-one trade agreement between the US and China, and better than expected economic data and corporate earnings, especially from the US.
On Monday, US stock and bond markets were closed in observance of the Martin Luther King Jr. holiday, but have off late been trading at record highs.
The signing of the phase-one trade deal might make global investors focus on markets or sectors that were negatively impacted from the trade uncertainty for most part of 2019. For the regional markets, quarterly earnings and easing of geopolitical risks will be two factors that will largely dominate the trading activity in the coming week.
Among other indices that were open for trading, the STOXX Europe 600 and UK’s FTSE 100 was down marginally, while market benchmarks in China, like the Shanghai Composite edged up 0.7 per cent.
The news of trade tensions was one of the top narratives for global markets, hence signing of the phase-one deal is an important move towards de-escalation of the trade tensions and also eases risk of new tariffs going forward, said Iyad Abu Hweij, Managing Director of Allied Investment Partners (AIP), a UAE based wealth and asset management firm.
Risks dim, but not snuffed
The signing of the so-called ‘phase-one’ trade agreement between the United States and China will reduce - but not eliminate - uncertainty that has dampened global economic growth, International Monetary Fund Managing Director Kristalina Georgieva said at an economics event, adding that the trade deal was an interim solution and may not do enough to reduce the drag from business investment. “The apparent ceasefire in the battle over tariffs removes a downside risk to growth. But tariffs remain high and we suspect that tensions will persist in other forms, adding to reasons to expect the global economic recovery to be a gradual one,” said Jennifer McKeown, head of the global economics service at Capital Economics.
At least for now fourth-quarter earnings and key economic releases will continue to influence the global markets.
“The signing of the phase-one trade deal might make global investors focus on markets or sectors that were n”egatively impacted from the trade uncertainty for most part of 2019,” Abu Hweij added. “For the regional markets, quarterly earnings and easing of geopolitical risks will be two factors that will largely dominate the trading activity in the coming week.
Upside for UAE property stocks?
With the UAE property market facing a persistently challenging atmosphere, analysts at FAB Securities said in a client note that valuations are likely to bottom-out soon after the last three years saw conditions worsening.
“We anticipate price in the residential real sector in Dubai is expected to bottom-out in 2020 supported by several short- and long-term measures undertaken by the government and Expo 2020,” said Shiv Prakash, senior analyst at First Abu Dhabi Bank Securities (FABS).
During late 2019, the surrounding area of Dubai South around the expo, including Dubai South, Emaar South and The Villages, have started witnessing a substantial upturn in demand compared to last year, the analysts estimated.
Mixed day of trading for UAE bourses
The main benchmark in Dubai recorded its first session of declines, after rising for seven sessions consecutively, pushed down by banking and property blue-chips.
The top index on the Dubai Financial Market (DFM) closed down 0.4 per cent, 12 points, at 2,850.95, while the Abu Dhabi Securities Exchange (ADX) edged up 0.8 per cent, or 40 points, to 5,213.
In Dubai, lenders declined, with Emirates NBD slipping 1.1 per cent and Dubai Islamic Bank shedding 0.5 per cent. Real estate giant Emaar Properties fell 0.2 per cent, while port operator DP World dipped 0.3 per cent.
Property and banking benchmarks in Dubai each fell 0.7 per cent. The sole gainer among real estate developers, Deyaar edged up 0.6 per cent.
In Abu Dhabi, the country’s largest bank, First Abu Dhabi Bank, gaining 0.8 per cent.