File photo: The shadow of a Saudi trader is seen on a stock market monitor in Riyadh, Saudi Arabia. Image Credit: AP

Dubai: Saudi Arabia’s Tadawul index bounced back nearly 4 per cent on Monday after steep losses in the previous session as Saudi Arabia agreed to a joint investigation with Turkey over the alleged disappearance of journalist Jamal Khashoggi.

The Tadawul index rose as much 3.98 per cent to hit a high of 7,556.11, before trading 3.86 per cent higher to be at 7,547.08. In the currency market, Saudi’s riyal fell to its lowest level in two years of 3.7513 against the dollar.

“The announcement of a formal investigation also more importantly suggests that diplomatic relations are intact and risks of further pressure in financial markets are contained, meaning I do think there is a likelihood that the Saudi Arabian markets can continue to recover from losses,” Jameel Ahmad, Global Head of Currency Strategy and Market Research at FXTM, told Gulf News.

The index shed as much as 7 per cent, the most since 2014, after US President Donald Trump warned of strong steps against Saudi Arabia over the missing journalist. Saudi Arabia denied having anything to do with Khashoggi’s disappearance.

“The most recent reports that the Turkish President and Saudi authorities have agreed to open a formal investigation over the matter also suggests a market-friendly outcome over the near-term and also explains why the atmosphere in the markets is less delicate than it would have been feared on Sunday,” Ahmad said.

On Monday, Saudi Arabia ordered the Saudi public prosecutor to investigate the fate of Khashoggi, and also agreed to Turkey’s request to search its consulate in Istanbul.

Emerging markets (EM) sang a different tone. The MSCI EM index was down 0.72 per cent to be at 973. Earlier, Asian stock indices closed 0.9-1.8 per cent lower.

“Asia is showing strong losses while futures on both sides of the pond are trending to the downside. Clearly investors are still concerned about the prospects of US domestic growth against a backdrop of trade tensions combined with a hawkish Fed that looks to keep raising rates,” Konstantinos Anthis, Head of Research at ADS Securities, said.

The developed and emerging markets witnessed massive sell-off last week after Trump questioned the rapid rise in interest rates even as bond yields scaled to its highest levels in seven years.

“A positive US consumer report may help alleviate some of the nervousness among stock investors but we will need a string of encouraging figures to alter the bearish sentiment at this point,” Anthis said.

Gold, which has been languishing since many years, saw a glittering return on markets.

The safe haven yellow metal gained 3.56 per cent last week, amid losses in other markets. Gold for December delivery was trading 1 per cent higher at 1,233.70 per ounce.

“If gold manages to hold above the key support of $1,214 then more gains will be likely,” Anthis added.

Oil prices

Oil prices continued its gaining streak amid supply worries from Saudi Arabia, the biggest producer in Opec, however dimmed demand outlook capped the upside.

Brent crude for December delivery traded 0.71 per cent higher to be at $81.02 per barrel. West Texas Intermediate was trading 0.71 per cent higher to $71.85 per barrel. Oil has retreated almost 8 per cent after reaching a four-year high earlier this month.