UAE bourses kicked off the week with a broad-based sell-off, a move that is expected to continue in the global markets later in the week.
The Dubai and Abu Dhabi indices breached the keenly watched 50-day moving average. The Dubai Financial Market general index closed 1.9 per cent lower at 2,715.68, below the 50-day moving average of 2,736. The Abu Dhabi Securities Exchange general index closed 1.41 per cent lower at 4,968.17. The 50-day moving average was placed at 5,085.
“The US market sentiment was replicated on the UAE bourses. Traders thought it was good to sell and sit on cash despite taking losses,” said an analyst who did not wished to be named.
Emaar Properties closed 4 per cent lower at Dh4.80, while Dubai Islamic Bank ended 1.5 per cent lower at Dh5.03. Gulf Finance House closed 0.5 per cent lower at Dh5.03. Traded value stood at Dh133 million, higher than the 30-day average of Dh122 million. Saudi Tadawul index was 2.4 per cent lower at 8,243.01, and has been trading below the 50-day moving average of 8,784.
Analysts say the sell-off would continue this week amid further escalation in trade war and signs from the central bank chief that the Fed is closely monitoring trade spat for its economic or geopolitical risks, triggering angry reactions from the US president Donald Trump.
“Powell is trying to provide a consistent message amid a barrage of market and political pressure to commit to more aggressive rate cuts. He continues to point to slowing growth, political risks and muted inflation as waymarks for further policy easing. Given that the first two have worsened since the previous Fed meeting, the stage looks set for a September cut. The concern in markets will be that a slow and steady Fed might be falling behind the curve,” Aberdeen Standard Investments Senior Global Economist James McCann said.
On Friday, the Dow Jones Industrial Average closed 2.37 per cent lower at 25,628.90. The S&P 500 index closed 2.59 per cent lower at 2,847.11.
“It was quite an eventful Friday that started off with China’s tit-for-tat extra tariffs on imports from US, Powell’s statement that Central Bank would “act as appropriate” but stopping short of committing to aggressive rate cuts and Trump’s aggressive response to China with an additional 5 per cent duty on $550 billion and more,” Phannendar Bhavraju, chief investment officer at Arrow Capital DIFC said.
Gold soared more than 2 per cent and reached an intra-day high of $1,528.79 per ounce, the highest since mid-August.
“We maintain a bullish outlook for gold with the technical target being $1,585. However, in the short-term the elevated long remains a challenge with the market in need of a catalyst to send it higher in order to avoid the temptation to book profit,” said Ole Hansen, head of commodity strategy at Saxo Bank.
Indian equities, rupee may look the other way
Indian equities and currency is expected to be spared off the sell-off after the government announced a slew of measures to boost the ailing economy.
The benchmark Sensex index closed 0.63 per cent higher at 36,701.16, after losing 1.7 per cent through last week. Indian rupee. which has been the worst performing Asian currency, was 0.21 per cent weaker at 71.665 against the dollar.
“In India markets should positively respond to the latest measures announced by the government which includes removing surcharge on FPIs among other measures. Nifty will target 5-7 per cent higher from the present levels and dollar/rupee to target 70-70.50 levels from the existing 71.50 levels,” Bhavraju said.