Dubai: Markets are expected to stay positive this week after strong earnings and jobs data from the United States started a rally last week.

Traders will also be keenly watching how newly imposed sanctions on Iran will play out.

“Earnings season, sanctions are on the top of the mind. The market ended on a positive note on Friday. I don’t see a big reason for markets to sell-off next week. The general vibe is positive. I don’t see any major headwind,” Nadi Bargouti, head of asset management, managing director with Emirates Investment Bank told Gulf News.

On Friday, the Dow Jones Industrial Average closed 0.37 per cent higher to 24,831.17, after gaining 2.3 per cent through the week. The S&P 500 index closed 0.17 per cent higher to 2,727.72 after rising 2.4 per cent last week. The Nasdaq Composite Index gained 2.7 per cent in the previous week before closing flat on the last day of the week.

The earnings season has been strong so far. About 91 per cent of the companies in the United States have reported an earnings growth of 25 per cent, and 77 per cent of those companies have reported a positive sales surprise.

“We have seen over 24 per cent in earnings growth. About 80 per cent of the companies have beat analyst forecast, that is a positive. The second quarter will be looked at if companies will post strong earnings growth,” Bargouti said.

Focus

“The focus of investors will shift towards central banks and the evolving geopolitical scenarios,” Aditya Pugalia, a director with Emirates NBD, said in a weekly note.

US President Donald Trump will meet North Korea’s leader Kim Jong Un in Singapore on June 12 for a historic meeting, a move that will ease the headwinds on the geopolitical situation that prevailed earlier.

Among other geopolitical factors, “we will have to see how the sanctions will play out and its impact on oil production of Iran. The bigger impact of Iran sanctions will be on oil and energy sector,” Bargouti said.

In the prevailing environment, Emirates Investment Bank focus is on shorter duration high yield bonds, and on emerging market equities selectively.

“We have shifted to floating rate notes or bonds to take advantage of higher rates. We tend to focus on shorter duration bonds due to flat yield curve,” Bargouti said.

“Selectively we can find value on emerging markets because they tend to benefit from a better economic environment. We like playing in selective themes. We have good exposure to high dividend yielding stocks,” he added.