When the US Federal Reserve meets on June 13-14, it may break its 18-month streak of interest rate increases. The Fed’s decision on interest rates can have a significant impact on global markets, including those in the GCC region.
A new report from investor relations consulting firm Iridium revealed that last week, the performance of GCC markets was mostly positive. Saudi Exchange (+3.5%) posted its first gain in four weeks, with the banking sector acting as the primary catalyst. Dubai (+2.6%) was driven by gains in several major companies like Emaar Properties, DEWA, and Gulf Navigation. Kuwait (+1.1%) kept its upward momentum for the second week running, while Oman (+0.6%) offset last week’s dip. Domestic and international investors helped Qatar (+0.5%) inch higher.
Abu Dhabi (-0.4%) posted a minor decline as did Bahrain (-0.2%).
In the US, markets responded warmly to speculation that the Federal Reserve might halt interest rate increases, with the S&P 500 (+0.4%), Dow Jones (+0.3%), and Nasdaq Composite (+0.1%) all ending positively. The Nasdaq also benefitted from an increase in Tesla which gained after inking a collaboration deal with General Motors. European markets, though, closed on a weak note. The CAC40 (-0.8%) fell the most, FTSE100 (-0.6%) and DAX (-0.6%) clocked identical losses, followed by STOXX600 (-0.5%).
Charting the waters of monetary policy shifts
In the aftermath of last week’s OPEC+ meeting, all eyes will pivot toward the upcoming US Federal Reserve monetary policy assembly. Anticipation of the Fed abstaining from an interest rate hike this week has been somewhat shaken by the Bank of Canada’s recent benchmark rate increase. On the corporate agenda, Al Buhaira National Insurance, DNI, and Union Insurance are expected to release 1Q 2023 results this week. In addition, CBI and IFA’s BoD will discuss increasing their respective share capital, while Ajman Bank’s shareholders will consider approving a rights issue, and BPC will seek shareholders’ approval for dividend distribution.
Waiting for the ECB and US Fed’s next move
In the US, investors will keep an eye on FOMC’s decision. The hawkish tone of the Fed has increased the expectations that interest rates can remain at higher levels for longer. Other economic data points coming next week will be retail sales, initial jobless claims, and CPI numbers. In the EU, the industry will also wait for the interest rate decision by the ECB. Markets expect ECB to raise interest rates by 25bps. In the UK, it will be a week full of economic data releases such as Jobless claims, unemployment, monthly GDP, and industrial production.
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