Traders at the New York Stock Exchange on Friday. As a monstrous rally in global markets lose impetus, investors this week will keep their eyes fixed on mounting rivalry between US and China and how the pandemic unfolds in key hotspots. Image Credit: Bloomberg

Dubai: As a monstrous rally in global markets lose impetus, investors this week will keep their eyes fixed on mounting rivalry between US and China and how the pandemic unfolds in key hotspots.

“While risky assets have already rebounded a long way since their lows in March, we think that they will generally make further ground over the coming months, albeit at a slower pace,” cautioned John Higgins, Chief Markets Economist at Capital Economics.

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“That view is underpinned by our forecast that the global economy will continue to recover, even if more slowly and unevenly than during its initial bounce-back over the past few months, and that ample policy support will remain in place for as long as it is needed.”

Eyes on how pandemic evolves

“Even though our forecasts are built on relatively conservative assumptions about the evolution of the coronavirus pandemic, the possibility that the recent resurgence of new cases forces renewed restrictions on economic activity remains the key risk to our generally optimistic views,” Higgins added.

World stocks ended four days of gains on Friday after US President Donald Trump cranked up simmering tensions with China by banning US transactions with two popular Chinese apps, Tencent’s WeChat and ByteDance’s Tiktok.

Gains capped on top benchmarks

Chinese stocks led losers in Asia and its currency slumped after Trump issued the executive orders. His administration said this week it was stepping up efforts to purge “untrusted” Chinese apps from US digital networks and called TikTok and WeChat “significant threats.”

European stocks opened lower, with major indexes down between 0.2 per cent to 0.4 per cent in early trading. MSCI’s broadest index of world stocks fell 0.2 per cent on Friday after up four consecutive days of gains. It was less than 3 per cent away from a late February peak.

Wall Street trading turns cautious

On Wall Street, the Dow ended Friday with a gain of 0.2 per cent, after spending most of the day in negative territory. The S&P 500 was largely unchanged while the Nasdaq fell 0.9 per cent.

The market had been heading for a drop before the employment numbers came out in the US, so investors clearly were relieved to see a bigger gain in jobs added and larger decline in the unemployment rate than economists had expected.

More weekly gains expected

However, all three indexes were higher for the week. The Dow rose nearly 4 per cent in the past five days while the S&P 500 and Nasdaq each gained more than 2 per cent.

“Going forward, equity markets could continue the upward trajectory on the back of improving macroeconomic environment and encouraging trend in COVID-19 cases,” said Iyad Abu Hweij, managing director at Allied Investment Partners.

“However, investors should remain cautious and focus on companies with the potential to gain market share and strengthen their position within its industry.”

UAE bourses fall into negative territory

Dubai and Abu Dhabi bourses started off the week on a sour note, with both indices slipping into negative territory as regional investors weighed energy prospects for the oil dominant region.

The Dubai Financial Market (DFM) ended down 0.66 per cent at 2,093 points, while the Abu Dhabi Securities Exchange (ADX) also dropped 0.6 per cent at 4,331 points.

The declines on DFM was driven by a 1.6 per cent fall in Emirates NBD Bank and a 1.1 per cent decrease in blue-chip developer Emaar Properties.

However, elsewhere in the GCC, Saudi Arabia’s benchmark index rose 0.3 per cent, with Al Rajhi Bank gaining 0.7 per cent, while Aramco stayed largely flat after reporting a 50 per cent fall in second-half profit.

The world’s biggest oil exporter attributed the drop in profit to the rapid spread of COVID-19 globally, which significantly reduced demand for crude oil, natural gas and petroleum products.

The industry is combating historic market and operational challenges. The coronavirus has caused the biggest shock to global energy markets in decades, but executives at Aramco are optimistic on the recovery trajectory in the third quarter and beyond.