Interest rates to remain a major theme for GCC markets

Global debt surged by $10 trillion
Interest rates to remain a major theme for GCC markets
Global markets

GCC markets mostly closed lower, except Dubai (+3.1 percent) which registered its biggest weekly gain in about two months as the DFM hit an eight-year high during the past week, according to Irifium advisors.

Qatar (+0.0 percent) stood flat as the buying support from foreign institutions counterbalanced selling pressure from other investor segments. However, Bahrain (-0.1 percent) edged lower for a third consecutive week. Abu Dhabi (-0.3 percent) slipped, mainly dragged down by IHC. Both Oman (-1.0 percent) and Kuwait (-1.3 percent) reversed their gains from the previous week. Saudi Arabia (-1.8 percent) witnessed a decline primarily due to setbacks in healthcare, financials, and energy sector stocks.

The US markets felt the pinch of unexpectedly hawkish remarks from the Fed, propelling the 10-year treasury yield to a level unseen in around 16 years. As a result, the Dow Jones (-1.9 percent) erased its prior week’s gain, while the S&P 500 (-2.9 percent), and Nasdaq Composite (-3.6 percent) slid further. European markets charted a similar course, with the FTSE100 (-0.4 percent) experiencing the lowest drop, succeeded by the STOXX600 (-1.9 percent), DAX (-2.1 percent), and CAC40 (-2.6 percent).

GCC markets

In the aftermath of the recent US Fed meeting, the outlook for the interest rate environment is expected to continue to remain a major theme for regional markets. While these uncertainties linger, the stability in crude oil prices may offer some solace. Goldman Sachs forecasts oil prices might touch the $100 per barrel threshold, citing OPEC+ supply restrictions and surging demand as driving factors. On the corporate agenda, this week,

OIC is scheduled to publish results and Muscat Finance will host an analyst call. In addition, several shareholder meetings are lined up where companies like ADNOC Distribution, Al Mazaya, Aljazira Takaful, Al Babtain Power, and Mayar Holding, among others, will seek approval on various agenda items, including dividends, bonus shares, rights, stock splits, capital reductions, etc.

Read: GCC markets: strong sentiment index surge

Global markets – Decoding economic indicators

In the US, it will be a busy week with a number of economic data releases such as GDP, inflation metrics, and personal income data. The industry projects a surge in personal income, buoyed by a robust labor market and a potential spending dip post summer vacations. In the EU, signals from the ECB suggest a potential culmination of its tightening phase, elevating the significance of the impending inflation data release.

In the UK, it will be a quiet week with only second-quarter GDP data being released.

Global debt

Major economies, including the US, the UK, Japan, and BRICS nations like China, Brazil, and India, have driven a significant rise in global debt. In the first half of 2023 alone, global debt surged by $10 trillion, reaching a staggering $307 trillion by the second quarter.

This growth occurred even as rising interest rates suppressed bank loan demand, as highlighted in a report by the Institute of International Finance (IIF). The report (Link) underscored a massive increase of $100 trillion in worldwide borrowings over the last decade. Current IIF projections indicate the debt-to-global GDP ratio grew from 334 percent at the end of 2022 to 336 percent and is expected to reach 337 percent by the close of 2023.

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