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Strong Q2 2023 earnings and crude oil optimism propel leading GCC equity markets

IMF ups global growth forecast
Strong Q2 2023 earnings and crude oil optimism propel leading GCC equity markets
Global markets

Last week’s performance in GCC equity markets presented mixed results. A wave of strong earnings reports propelled Qatar to a notable surge (+4.3 percent). according to Iridium Advisors.

Abu Dhabi (+1.4 percent) found some strength, attributable to impressive results from banks. Dubai (+1.3 percent) overturned the loss from the preceding week. Bahrain (+0.8 percent) and Saudi Arabia (+0.8 percent) clocked matching gains, the latter buoyed by strengthening crude oil prices and positive earnings releases. Oman (-0.5 percent) saw a successful streak of seven weeks halted, and Kuwait (-0.8 percent) followed suit, negating its gains from the previous week.

Read: GCC market dynamics underpinned by $80 crude oil

In the US, both Dow Jones (+0.7 percent), and S&P 500 (+1.0 percent) carried on their upward trend, while Nasdaq Composite (+2.0 percent) clawed back its previous week’s loss. Positive earnings news and growing optimism that the US Fed may take a breather from interest rate hikes supported these developments, reflecting the June slowdown in US consumer prices. European markets continued their ascent, led by the DAX (+1.8 percent), and followed by STOXX600 (+1.2 percent), CAC40 (+0.6 percent), and FTSE100 (+0.4 percent).

The Week ahead

The positive momentum in regional markets is expected to persist, bolstered by three key factors – the anticipation of interest rate tightening nearing its end, confidence in the global economy averting a recession, and tight crude oil supplies – all reinforced by five consecutive weeks of oil price increases. On the corporate agenda, this week, Ajman Bank, Aldar, Alpha Dhabi, Boursa Kuwait, BisB, e&, Emsteel, Fertiglobe, Nakilat, Ooredoo, RAK Properties, and TECOM Group, among others, are expected to post their Q2 2023 results.

In addition, big names such as Aldar, e&, Ooredoo, SNB, and more are scheduled to host earnings calls.

Global markets

In the US, the week will be busy with key economic data releases, such as job openings, unemployment rates, and non-farm payroll reports, among others. Non-farm payroll data is likely to reveal hiring cooling to 185k from 209k, while unemployment rates are predicted to remain at around 3.6 percent. In the EU, crucial economic data points like CPI, GDP, Manufacturing PMI, and unemployment rate are due for release.

The UK, too, is set for a pivotal week, with market watchers poised for Manufacturing PMI figures and BOE rate decisions. An interest rate hike of 25 bps by the BOE is widely anticipated.

IMF global growth forecast

The IMF nudged up the 2023 global growth forecast to 3.0% from 2.8%, propelled by Developed and, to a lesser extent, Emerging Markets. Nevertheless, the global outlook remains sluggish, with economic and trade growth behind 2000-2019 averages due to debt issues in several frontier economies and potential further deceleration in China.

On the positive side, with little evidence of wage-price spirals across DM and well-anchored long-term inflation expectations, the IMF’s outlook may inspire confidence in DM rate cuts for 2024. Growth upgrades for 2023 were notable for Brazil (+1.2 ppts), Spain (+1.0 ppts), and Poland (+0.9 ppts), while Argentina (-2.7 ppts), Saudi Arabia (-1.2 ppts), and Pakistan (-1.0 ppts) shouldered the largest downgrades.

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