Monday outlook: Gulf Markets down on Turkey trade tension with the U.S.

Reuters Images/Brian Snyder

A United States decision to double tariffs on Turkish steel and aluminium imports and Saudi Arabias announcement it will severe diplomatic and trade ties with Canada have dragged several of the Gulf Arab states indices down on Sunday. More details on the impact on the oil market, Turkish currency and outlook for gold.

Yasmine Saleh, ZAWYA

August 13, 2018

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• Gulf stocks fell on Sunday due to regional diplomatic tensions
• Saudi Arabian index dropped 1.2 percent, below 100-day average
• Abraaj founder Naqvi quits Air Arabia board
• Saudi Aramco, Air Products and ACWA Power to form joint venture in Kingdom
• Gold prices subdued as dollar remains strong, near 13-month high
• Euro hit one-year lows on Turkey’s tension

Middle East markets:

Gulf stocks traded down on Sunday, with tension between the United States and Turkey weighing the most on the Qatar market, dragging its index down 2.6 percent, while Saudi Arabia fell by 1.4 percent, below its 100-day average for the first time this year. It closed at 8,065 points, the lowest since late May.

Qatar’s market was pulled down by Commercial Bank and Qatar National Bank, which dropped 4.1 percent and 4.7 percent, respectively. QNB owns Finansbank in Turkey and Commercial Bank has a majority stake in Turkish lender Alternatifbank.

"MENA (Middle East and North Africa) equities remain under-represented in global portfolios (and are thus less exposed to global EM (emerging market) outflows)," Sanat Sachar, equity research analyst at Al Mal Capital, told Reuters in comments about the Gulf markets' performance on Sunday.

"GCC (Gulf Cooperation Council) equities are pegged to the U.S. dollar, and are thus insulated from the EM local currencies turmoil. This means that some asset allocators could even consider the GCCs as an EM safe haven.”

The Dubai index shed 1 percent, with Air Arabia was down 2.9 percent. Board member Arif Naqvi, who is the founder of embattled private equity group Abraaj, has resigned from the board of the low-cost carrier Air Arabia. The news was released late on Sunday when the markets had closed.

The company last week reported a 24 percent drop in second quarter profit.

The low-cost airline, which in June disclosed an exposure of $336 million to private equity group Abraaj – which is headed for liquidation – said in its financial statement for the first half of 2018 that a short-term investment of 275 million UAE dirhams ($74.88 million) in Abraaj had not been repaid after maturing at the end of June.

All Gulf Arab markets ended trading down on Sunday. Abu Dhabi, Kuwait and Oman all slipped 0.6 percent, while Bahrain fell 0.1 percent.

In another market-related news, the Abu Dhabi Securities Exchange (ADX), has distributed more than 23.4 billion UAE dirhams in cash dividends to around 406,000 investors on behalf of listed companies in 2018, Trade Arabia reported, citing the UAE news agency WAM.

In Saudi Arabia, Saudi Aramco, Air Products and ACWA Power announced on Sunday they had signed a deal to set up a gasification/power joint venture in the kingdom with assets bought from the state energy giant, Reuters reported. "The JV will purchase the gasification assets, power block and the associated utilities from Saudi Aramco for approximately $8 billion," Reuters said, quoting a joint statement by the three companies.

Oil prices

Oil prices edged up in early trade on Monday, as concerns remained over global trade tensions. Front-month Brent crude oil futures were at $72.88 per barrel at 0053 GMT, up by 7 cents from their last close.

U.S. West Texas Intermediate (WTI) crude futures were up 16 cents at $67.79 per barrel.

Gold and Currencies

Spot gold slipped 0.1 percent to $1,209.53 an ounce in early trade on Monday as the U.S. dollar continues its firm stand near a 13-month high against a number of international currencies. The dollar index, which measures the greenback against a basket of currencies, was little changed at 96.393 after climbing to its highest since early July 2017 at 96.505.

U.S. gold futures were down about 0.2 percent at around $1,216.80 an ounce.

The euro declined to a 13-month low against the dollar on Monday as investors opt for safe havens such as the U.S. dollar and the yen, on concerns about the exposure of European banks to Turkey. The Turkish lira hit a record low of 7.24 against the dollar in early trade on Monday. The Turkish currency fell 18 percent to a record low on Friday.

Global markets:

In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.1 percent in early trade on Monday.

EMini futures for the S&P 500 were off 0.33 percent, while 10-year Treasury yields dipped further to 2.85 percent. China's blue chip index dropped 1.2 percent, while Hong Kong stocks lost 1.4 percent as the local dollar fell to the limits of its trading band.

The U.S. market was closed on Sunday.

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(Writing by Yasmine Saleh; Editing by Shane McGinley)
(yasmine.saleh@thomsonreuters.com)

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