Gulf stocks fall on tight monetary policy outlook

Bahraini traders are pictured at the Bahrain Stock Exchange in Manama, Bahrain November 5, 2020. REUTERS/Hamad I Mohammed

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Aug 28 (Reuters) – Major Gulf stock markets ended lower on Sunday as investors in the region reacted to comments by Federal Reserve Chairman Jerome Powell that the U.S. economy would need monetary policy tight “for a while” to control inflation.

Following in the footsteps of their global peers, Gulf markets came under downward pressure as investors worried about a bleaker growth outlook amid a more hawkish policy stance from the US Fed chief.

“His comments were more upbeat than investors expected and signaled that the central bank was not considering pausing the tightening cycle prematurely even with lower US inflation,” said market analyst Farah Mourad. senior at XTB MENA.

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“The central bank’s tone could fuel international investors’ risk aversion and drive them away from other markets,” Mourad added.

Saudi Arabia’s benchmark index (.TASI) fell 0.5%, mostly under pressure from lenders as nearly all fell into negative territory. Al Rajhi Bank (1120.SE) lost 1.4% and Saudi National Bank (1180.SE) fell 1.3%.

Most Gulf Cooperation Council countries, including the kingdom, have their currencies pegged to the dollar and generally follow Fed policy actions, exposing the region to a direct impact from monetary tightening.

Oil giant Saudi Aramco (2222.SE) fell 1.7% as slowing global growth could potentially reduce demand for oil.

Financial stocks also sent the Qatar index (.QSI) down 0.4%, with the Gulf’s biggest lender, Qatar National Bank (QNBK.QA), losing 1.4%.

Outside the Gulf, Egypt’s blue chip index (.EGX30) fell 1.1%, while E-Finance for Digital and Financial Investments (EFIH.CA) fell 5.5% and Commercial International Bank (COMI.CA) lost 1.2%.

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Reporting by Shakeel Ahmad in Bangalore; Editing by Alex Richardson

Our standards: The Thomson Reuters Trust Principles.

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