DUBAI: A fresh tumble of oil prices overnight looks likely to dampen Gulf stock markets on Thursday, while Egypt may continue testing technical resistance.
Brent oil, hit by expectations that OPEC will keep its output ceiling unchanged at this week’s meeting, sank more than 4 percent to below $43 a barrel overnight – to just above a six-year low.
Also, hawkish comments by U.S. Federal Reserve Chair Janet Yellen reinforced the case for a U.S. interest rate hike later this month.
The markets had already been expecting a rate hike, but it could be negative for the Gulf by slightly increasing pressure for capital outflows and leading eventually to tighter monetary policy in the region.
Saudi Arabia’s index, which last closed at 7,347 points, is technically short-term bullish and has been in an uptrend since mid-November, but the risk of oil hitting fresh lows may hurt sentiment at least temporarily. The index has technical support at its mid-November high of 7,161 points.
In Egypt, the index, which jumped 3.5 percent on Wednesday to 6,650 points, is set to test minor chart resistance on the late November peak of 6,642 points. Any clean break would trigger a double bottom formed by the November lows and pointing up to just below 7,000 points.
Egypt’s central bank plans to inject dollar liquidity into the market this month and plans an exceptional foreign exchange auction, the Egyptian presidency said late on Wednesday, the latest move to end a long-running currency crisis.
Authorities’ new energy in tackling the crisis is welcome to the market, but it remains unclear where Egypt will obtain the hard currency to increase dollar supplies, and many economists think a devaluation at some point remains inevitable. So foreign investors may remain cautious.
Speculation may continue over the fate of Global Telecom , which surged its 10 percent limit to 1.87 Egyptian pounds on Wednesday in its heaviest trading in five weeks.
In a brief statement, it said a newspaper, which it did not name, had published a story on rumours that European firm Vimpelcom had offered to buy out Global at a price of 2.30 pounds per share. Vimpelcom already owns about 52 percent of Global, according to the latest data.
The company does not respond to rumours and confirms that the company does not have any material events unannounced,” Global said without elaborating. Contacted by Reuters in Amsterdam, Vimpelcom said: “As a matter of policy, we don’t comment on market rumours and speculation.”
Last Thursday, Vimpelcom said it and Global would combine their business in Pakistan with Warid Telecom, which may have prompted speculation about further consolidation.