DUBAI: Weak oil prices and the prospect of a U.S. interest rate hike in December may dampen stock markets in the Middle East on Sunday.
Oil prices fell as much as 2 percent on Friday, with Brent ending below $48 a barrel. Meanwhile, short-term U.S. bond yields rose to their highest in five years after very strong U.S. jobs data for October boosted the likelihood that the Fed will raise rates before year’s end.
Money market rates have already been rising in the Gulf as liquidity shrinks because of lower oil revenues, and higher U.S. rates could intensify the simultaneous fiscal and monetary squeeze in the region – with a particularly negative impact on real estate stocks.
With the Egyptian pound under pressure in the parallel foreign exchange market, the prospect of higher U.S. rates and a stronger U.S. dollar may intensify expectations that Egypt’s central bank will soon have to guide the pound lower.
Among individual stocks, Air Arabia, the United Arab Emirates’ only publicly listed airline, reported a 6 percent fall in third-quarter net profit to 235 million dirhams ($64 million), missing analysts’s average prediction of 300 million dirhams.