Gulf Stock Markets Decline as US Interest Rate Cut Expectations Recede

Major stock markets in the Gulf region experienced a downturn on Sunday, led by Qatar's index, amid diminishing expectations of US interest rate cuts. This decline followed resilient economic data and hawkish comments from the Federal Reserve's recent policy meeting.

Qatar's benchmark index dropped 1.7% to 9,396, marking its lowest level in nearly seven months. All constituents posted losses, with Industries Qatar falling 1.3% and Qatar National Bank, the region's largest lender, slipping 2.2%.

Saudi Arabia's benchmark index declined 1.2% to close at 11,851, its lowest in about four months. Almost all sectors were in the red, with Al Rajhi Bank, the world's largest Islamic lender, slipping 1.4% and Saudi Aramco losing 1.7%.

In contrast, Egypt's blue-chip index gained 1.2%, supported by gains in most sectors. Eastern Company climbed 2.9% and Madinet Masr rose 4.3%, with the developer posting a 286% surge in its first-quarter net profit.

The decline in Gulf stock markets has significant implications for global financial markets and economies. This could lead to a ripple effect, influencing investment decisions and economic growth in the region and beyond.

The decline in Gulf stock markets is attributed to robust economic data from the US, which showed an acceleration in business activity in May. Additionally, hawkish US Federal Reserve minutes released on Wednesday led traders to dial back their bets on rate cuts this year.

Most Gulf currencies are pegged to the US dollar, and any changes in US monetary policy are usually followed by Saudi Arabia, the United Arab Emirates, and Qatar. This linkage makes Gulf economies sensitive to US interest rate movements.

Among other Gulf markets, UAE tracked oil prices lower, Kuwait's market ended flat at 7,783, Bahrain's market ended flat at 2,020, and Oman's market gained 0.1% to 4,806.

Notable events included ADES Holding gaining 1.8% after being awarded a $645 million contract by Kuwait Oil Co. Additionally, Saudi Arabia is planning a multi-billion-dollar share sale in Aramco as soon as June.

Egypt's central bank kept its overnight interest rates steady last Thursday, citing a balance between slowing economic growth and rising non-food inflation.

Overall, the Gulf stock markets' decline emphasizes the region's sensitivity to US monetary policy changes, highlighting the interconnectedness of global financial markets.

Key Takeaways

• Gulf stock markets decline led by Qatar's 1.7% drop amid reduced US rate cut expectations.
• Saudi Arabia's benchmark index falls 1.2% to a 4-month low, with most sectors in the red.
• Egypt's blue-chip index gains 1.2% despite regional downturn, supported by strong earnings.
• Robust US economic data and hawkish Fed minutes drive Gulf market decline.
• Gulf economies are sensitive to US monetary policy changes due to currency pegs.