Trade war, Fed to weigh on global equities, gold may shine
THE DOW JONES INDEX CLOSED THE QUARTER ON A WEAK NOTE, ENDING 3% LOWER
Global equities may still face uncertainty this week despite the Dow Jones index snapped a nine quarter winning streak.
Vagueness over a potential trade war between the US and China interest rate hikes from the US Federal Reserve are likely to weigh on investors going forward, with no sign of recovery in sight.
The Dow Jones Industrial Average closed the quarter on a weak note, ending 3 per cent lower, snapping its nine- quarter winning streak, the longest in 20 years. The Dow, which struck a record high of 26,600 in late January, witnessed record volatility amid fears that faster than expected rise in inflation could trigger higher rates.
“Markets will remain jittery, as the focus will be on trade wars and policy actions. The upcoming non- farm payrolls, and that will be major denominator for markets, and that will decide the direction,” Naeem Aslam, chief market analyst with Think Markets told Gulf News.
The S& P 500 index on the other hand closed 1.38 per cent higher to 2,640.87, after registering 1.22 per cent loss so far in the year. “If S& P 500 index breaches the 200 day moving average, we may see a leg down,” Aslam said. UBS said the presence of uncertainty over trade means investors need to manage against tail risks.
“This is challenging in a time of strong global growth, because the very positions that can be expected to perform well [ Canadian dollar, emerging market and Eurozone equities, are also those that could be vulnerable in the event of a trade war,” Mark Haefele, global chief investment officer at UBS said in a note.
UBS plans to overcome this uncertainty by keeping its prorisk stance, but also hold counter- cyclical positions, which may benefit from a market downturn.
Gold may stand to benefit from the uncertain economic environment. “I’m still bullish on gold due to geopolitical uncertainty. For me to be completely confident we need to close above $ 1,350. My yearend target $ 1,450,” Aslam from Think Markets said. Gold in the international spot market was at 1,325.50 an ounce, after gaining 14.8 per cent in the first quarter, registering its third straight quarterly rise.
Mild buying continued in UAE bourses even as Saudi Arabia declined for a second day after the inclusion to the emerging market index.
The Dubai Financial Market General Index closed 0.90 per cent higher at 3,136.36. Traders resorted to buying in shares of Deyaar, Dubai Islamic Bank, Amanat, Union Properties, Abu Dhabi Islamic Bank, Abu Dhabi Commercial Bank, Eshraq, Aldar, Taqa among others. Emaar Properties closed at Dh5.85, up 0.86 per cent. Union Properties closed 1.96 per cent higher at Dh0.886. Deyaar Properties closed 1.68 per cent higher at Dh0.484. Gulf Finance House closed 1.48 per cent higher at Dh1.37.
The Abu Dhabi Securities Exchange general index closed 0.04 per cent lower at 4,583.53.
Abu Dhabi Islamic Bank closed 0.08 per cent higher at Dh3.79. Abu Dhabi Commercial Bank was flat at Dh6.70 while Taqa shares are almost flat at Dh0.81.
Saudi Arabia’s Tadawul index closed 0.72 per cent lower at 7,814.54, extending losses for another session.
The index had gained more than 5 per cent in the run- up to the FTSE Russell decision to upgrade Saudi equities.
“We expected FTSE to announce the inclusion of Saudi in their EM Index. The muted market reaction suggests that retail investors were positioned for it and were in no rush to add exposure. At 17.5x trailing twelve- month earnings, the overall market valuation is not cheap and at a small premium to its historical average,” Al Mal Capital said in a note.
Alinma Bank closed 0.73 per cent lower at 20.44 Saudi riyals. Saudi Basic Industries Corp closed 0.18 per cent lower at 116.20 riyals. Dar Alarkan Real Estate Development Co closed more than 2 per cent higher at 12.82 riyals. Elsewhere in the Gulf, the Qatar exchange index closed 1.11 per cent higher at 8,669.04.
The Muscat MSM 30 index closed 0.76 per cent lower at 4,737.17, while the Bahrain all share index closed 1.16 per cent lower at 1,303.14. Meanwhile, the Kuwait index closed 1.08 per cent lower at 4,945.90.