GCC stock markets to follow oil price, Saudi-Russia deal

Globally, the equity markets could be weighed down by the growing jobless rate in the US.

  
A broker looks at the electronic display boards in the Dubai Financial Market.

A broker looks at the electronic display boards in the Dubai Financial Market.

REUTERS/Ahmed Jadallah

The UAE and other regional equity markets will toe the oil price movement this week and Saudi-Russia spat over production cuts while global equity markets could also go south and lose last week's gains due to surge in US jobless rate.

Vijay Valecha, chief investment officer at Century Financial, said crude, which rallied 50 per cent from the lows last week, is going to be the biggest driver for GCC equity markets this week.

"The fragile consensus between Saudi Arabia-Russia is on the verge of breaking down as leaders of the two nations trade barbs at each other. Saudi Arabia has also insisted that a deal has to involve also US, Canada and Brazil also. This could be a deal breaker as oil producers in US are governed by competition laws which prevent them from colluding with each other to control production. Oil could again fall and this could trigger downward price movement in GCC indices," Valecha said.

Russian president Vladimir Putin on Friday said global cuts of around 10 million barrels per day is possible, reflecting alarm at the sudden collapse in demand sparked by coronavirus pandemic.

Globally, the equity markets could be weighed down by the growing jobless rate in the US. For the week ended on March 28, a record 6.6 million Americans filed for unemployment insurance which is double from the 3.3 million last week. Some forecasts suggest that the total number of people availing of benefits could cross 20 million in the next one month.

"The scale of challenge before the global economy is monumental and this is reflected in US unemployment numbers. As the number of Corona virus infections surge to more than a million, businesses are shutting down and total number of Americans claiming unemployment benefits have rose to more than 10 million. The stimulus announced so far might not be sufficient and international equities could give up the gains of last week," Valecha added.- waheedabbas@khaleejtimes.com

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