Dubai: As rising number of cases in several key economies threaten the hopes of a swift recovery for markets, volatility is set to remain persistent in the coming days.
The uncertainty surrounding a renewed spike in new COVID-19 infections in several parts of the US, Mexico, Brazil, South Africa, India, Japan and Australia, combined with some profit booking happening after the recent rally, means that any gains will be stay capped in stock markets the coming days.
“The sharp increase in confirmed cases has led to growing concerns that a return to broad lockdowns lies ahead,” analysts at Goldman Sachs wrote in a note. “While lockdowns can slow down virus spread effectively, they come at very high economic cost.”
Better earnings ahead?
As the earnings announcements begin after a washout quarter for most industries, analysts are however, hopeful of firms positively revising their outlook according to a general market wide perception of a rebound by the end of the year.
“Despite higher risk, second-quarter earnings and guidance are likely to surprise on the upside in our view,” said Stéphane Barbier de la Serre, macro strategist at Makor Capital Markets.
Even with the inference of a stable earnings season approaching, the prior week ended with global equity benchmarks struggling for direction and bond yields flat-lined as investors weighed a record number of new coronavirus against improving economic data.
Struggling for direction
MSCI’s gauge of stocks across the globe barely made any headway in gains last week following broad gains in Europe and slight losses in Asia. Chinese shares fell 1.8 per cent from a five-year high, as state media discouraged retail investors from chasing the market higher.
Cases of the respiratory ailment have also been rising in some cities which had earlier appeared to have contained the disease, such as Tokyo, Hong Kong and Melbourne, prompting investors to move into perceived safe havens. Gold prices rose last week as a result, rising by 1.25 per cent.
When it comes to the prices of so-called liquid gold, Brent and US crude rose over 1 per cent as well, after the International Energy Agency (IEA) bumped up its 2020 oil demand forecast. But the IEA, the institution that advises oil consuming nations, said the spread of COVID-19 posed a risk to the outlook.
Both indexes gained at the start of the week, with the DFM gaining 0.17 per cent at 2,085 points, while the ADX rose 0.48 per cent at 4,316 points.
After dropping about 4 per cent in the month of May, the Dubai Financial Market (DFM) rose 6 per cent in the month of June. Similarly, the Abu Dhabi Securities Market (ADX) slipped 2 per cent in May and rose 3.5 per cent last month.
Elsewhere, most other major stock markets in the Gulf rose in early trade on Sunday ahead of the usual flurry of corporate results that begins after July 15 each year.
While Saudi Arabia’s benchmark index increased 0.4 per cent, in Qatar, the index edged up 0.1 per cent.