Gulf markets dip amid inflation concerns and dampened hopes of Fed rate cut

Gulf stock market news: Major stock markets across the Gulf region experienced declines on Monday, February 19, following the release of data indicating higher-than-expected US producer prices in January. This news has amplified concerns over inflation and dampened hopes for early interest rate cuts by the Federal Reserve.

The surge in US producer prices, particularly in services, has fueled worries about inflation, prompting investors to reassess the possibility of imminent rate cuts by the Federal Reserve. Many Gulf Cooperation Council (GCC) countries, including the United Arab Emirates (UAE), closely align their currency policies with the US Dollar and closely monitor the Fed's monetary policy decisions.

Saudi Arabia's benchmark index, TASI, witnessed a 0.4 per cent decline, marking a potential end to a 12-day winning streak. This drop was primarily driven by a 1 per cent decrease in Al Rajhi Bank's shares. Additionally, Saudi Aramco, the oil giant, experienced a 0.2 per cent decrease, reflecting broader concerns about the demand outlook for oil amidst inflationary pressures and the prospect of higher interest rates.

The decline in oil prices, which serve as a key driver for the Gulf's financial markets, further contributed to the subdued sentiment. Investors redirected their focus to the demand outlook amid apprehensions that persistent inflation and rising interest rates could curtail fuel consumption growth.

In Qatar, the benchmark QSI index slipped by 0.4 per cent, primarily influenced by a 5 per cent drop in the shares of Qatar Fuel Company. Similarly, Abu Dhabi's FTFADGI recorded a 0.3 per cent decline.

Despite the overall downtrend, Dubai's main share index DFMGI managed to gain 0.2 per cent. Emirates NBD's shares rose by 0.8 per cent, contributing to the index's modest uptick.

The mixed performance of Gulf markets reflects investors' cautious stance amid heightened uncertainty surrounding inflationary pressures and monetary policy directions. As markets continue to digest economic data and assess central bank actions, volatility may persist in the near term, with market participants closely monitoring developments both locally and globally.

(With Reuters inputs.)