|09 September, 2018

Sunday outlook: Global stock markets register biggest weekly decline since March

Stock markets around the globe had their biggest weekly decline last week since mid-March as trade tensions between the U.S. and China have been weighing on sentiment. The dollar was supported by strong U.S. job growth data. More commentary on Middle East markets, oil prices and precious metals.

Image used for illustrative purpose. A pump jack operates in an oil field in Midland, Texas U.S. August 22, 2018.

Image used for illustrative purpose. A pump jack operates in an oil field in Midland, Texas U.S. August 22, 2018.

REUTERS/Nick Oxford
  • Global markets register biggest weekly decline since March
  • Saudi Arabia’s index drops for the week
  • Oil prices ended the week mixed
  • The dollar adds gains on stong U.S. job growth data
  • Gold prices retreat on a strong dollar

Global markets

Stock markets around the globe had their biggest weekly decline last week since mid-March, with MSCI's gauge of stocks across the globe index dropping 0.28 percent on Friday and 4.4 percent for the week.

Solid U.S. job growth data indicated the U.S. Federal Reserve interest might hike rates for the third time this year in late September. Trade tensions between the United States and China weighed on equities after U.S. President Donald Trump threatened tariffs on a further $267 billion worth of Chinese imports.

On Wall Street, the Dow Jones Industrial Average fell 79.33 points, or 0.31 percent, to 25,916.54, the S&P 500 lost 6.37 points, or 0.22 percent, to 2,871.68, and the Nasdaq Composite was down 5.3 points or 0.07 percent at 7917.25.

For the week, the S&P fell 1.03 percent, the Dow lost 0.19 percent, and the Nasdaq fell 2.55 percent.

Middle East markets

Saudi Arabia’s index closed 0.4 percent lower on Thursday, dropped 3.3 percent in the first week of September. Despite the recent drop in the market, the Saudi index has added 6.3 percent so far in 2018.

On Friday, Saudi Basic Industries dropped 2 percent and refiner Petro Rabigh fell 3.8 percent.

"Currently what we see is that the premium to valuation multiples has declined," Mazen al-Sudairi, head of research Al Rajhi Capital, told Reuters. "This is because fund managers are looking to reduce equities exposure due to trade wars and especially emerging markets given the steep decline in EM (emerging market) currencies. In our view the probability of downside from these levels is very limited."

Dubai’s index added 0.3 percent on Thursday, as Union Properties rose almost 5 percent and Emaar Development added 1.9 percent.

Neighbouring Abu Dhabi’s index edged down 0.2 percent as Abu Dhabi National Energy Co was down by 2.6 percent. Union National Bank, which saw big gains this week on news that it is in merger talks with Abu Dhabi Commercial Bank, was last down 4 percent.

Qatar’s index ended the day flat, Egypt’s index rose 0.3 percent, Oman’s index was flat, while Kuwait’s index edged up 0.2 percent and Bahrain’s index rose 0.4 percent.

Oil prices

Oil prices were mixed on Friday, as investors weighed weak global markets and geopolitical factors that might reduce oil supply.

Brent crude futures settled up 33 cents at $76.83 a barrel as protests in Iraqi city of Basra gave Brent some support.

“The situation in Basra has really flamed up ... that’s giving Brent some help here,” John Kilduff, partner at Again Capital in New York, told Reuters.

U.S. West Texas Intermediate (WTI) crude futures settled down 2 cents at $67.75 per barrel.

Currencies

The dollar index against a basket of six major currencies was 0.37 percent higher boosted by strong data from the U.S.

U.S. job growth accelerated in August and wages notched their largest annual increase in more than nine years.

The dollar was also supported by trade tensions between the U.S. and China.

“If these tariffs go into effect, (China) may have to cushion the economy by devaluing its currency again,” said Quincy Krosby, chief market strategist at Prudential Financial in Newark, New Jersey. “That will push the U.S. dollar higher, which puts more pressure on emerging markets. It will also have a negative effect on U.S. exporters.”

Precious metals

Gold prices retreated on Friday on a stronger dollar.

Spot gold fell 0.1 percent to $1,198.40 as of 1337 GMT, after it hit a near one-week high on Thursday at $1,206.98.

U.S. gold futures were flat at $1,203.80 an ounce.

(Writing by Gerard Aoun; Editing by Mily Chakrabarty)

(gerard.aoun@thomsonreuters.com)


 

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