Global shares to face more setbacks
DIVING DUBAI STOCKS MAY BE PRECURSOR TO FURTHER DROPS ON MULTIPLE ISSUES
Yesterday’s near 4 per cent fall in Dubai stocks, following a sharp drop in global oil prices on Friday and lower than estimated corporate earnings for the third quarter, could be a precursor to a further downside in global equities.
The terrorist attack in France, that killed 129 people, is also expected to push global markets lower today.
Yesterday, the Dubai Financial Market General Index closed 3.65 per cent lower at 3,146.21, after hitting a low of 3,127.96, a level last seen in January. On Friday, the Dow Jones Industrial Average closed 1.16 per cent lower at 17,245.24. The S&P 500 index also ended 1.13 per cent lower at 2,023.04.
“Unfortunately at the moment, we are lacking a positive story for world equities whether it is better economic news or central banks being helpful. The other concern that people have is that the Federal Reserve may back off from raising rates for a second time in December,” Gary Dugan, chief investment officer at National Bank of Abu Dhabi told Gulf News.
“Global equity markets are in a no-man’s-land and may fall further before it finds some key support. The risk would be to the downside at the start of the week,” Dugan added.
Economic headwinds
US policymakers are cautiously moving toward their first rate increase in almost a decade. Fed Vice-Chairman Stanley Fischer said on Thursday that it “may be appropriate” to raise borrowing costs next month, adding that the Fed’s decision to delay boosting rates has helped to offset economic headwinds caused by a stronger dollar.
Minutes from the Fed’s October meeting will also be published this week, giving an insight into the Committee’s decision to remove a key sentence on global risks from its policy statement. There are some good signs. “We are seeing signs that China is improving and good signs that Europe is consistently producing reasonable growth. This shows that things are not all negatives around the world, but there are some things which are improving,” Dugan said.
In China, where Beijing has rolled out a flurry of support measures since last year to avert a sharp slowdown, key data will show how the country’s housing market is performing and whether it is supporting the struggling economy.
Bottoming out
The Shanghai Stock Exchange Composite Index closed 1.43 per cent lower at 3,580.84.
The slide in oil prices could also be close to bottoming out. “We are close to that bottom in oil, and I would be surprised to see further downside in crude. We would see traders buying back into the market at $40 [Dh147] per barrel level in WTI,” Dugan said.
Dugan feels that Brent crude may trade in the range of $45-50 per barrel.
On Friday, West Texas Intermediate futures fell 2.4 per cent to end at $40.74, while Brent crude fell more than 1.59 per cent to end at $44.47.
Crude has dropped 45 per cent in the past year as the Organisation of Petroleum Exporting Countries pumped above its collective quota adding to the swelling global stockpiles.