STOCK markets in the UAE closed higher yesterday after UAE central bank lowered interest rates by a quarter percentage point, in line with the US Federal Reserve.
The move sparked optimism for stronger economic growth and boosted investor confidence.
The Fed cut its policy rate by 25 basis points on Wednesday and indicated that more cuts would follow as it responded to signs of weakness in the job market.
The Fed’s stance holds implications for Gulf economies including UAE, where most currencies are pegged to the US dollar.
Dubai’s main index jumped 0.7 per cent, boosted by gains in heavyweight real state and industrial sector index with Emaar Development rising 4.9pc, while Gulf Navigation Holding climbed 6.8pc.
Dubai developer Emaar Properties jumped 1.1pc, mirroring the previous session’s gains after the firm scrapped plans to sell any stake in its Indian subsidiary and said it is exploring potential joint ventures with major Indian companies, including the Adani Group.
Abu Dhbai’s benchmark index settled 0.3pc higher, led by a 1.5pc hike in Adnoc Gas and 3pc jump in Emirates Telecommunications Group. Abu Dhabi’s market still has room to perform, particularly following this week’s interest rate cut, according to Milad Azar, market analyst at XTB Mena. However, ongoing uncertainty around oil prices at current levels remains a potential risk to the market’s upward momentum.
Separately, the UAE economy is projected to grow 4.9pc in 2025, up from a prior forecast of 4.4pc, on higher oil production and strong growth in the non-hydrocarbon sector, the central bank said.
Abu Dhabi index recorded a 1.1pc gain on a weekly basis, while Dubai logged a 0.1pc dip – LSEG data Oil prices – a key catalyst for Gulf’s financial market – was slightly down as demand concerns overshadowed US rate cut buoyancy.
Global stocks rose yesterday and were on track for a weekly gain driven by positive sentiment on Wall Street as well as European equity markets following key central bank decisions.
On Wall Street, all three indexes were trading higher after rising to record highs in the prior session. The Dow Jones Industrial Average rose 0.11pc to 46,192.35, the S&P 500 rose 0.24pc to 6,647.74 and the Nasdaq Composite rose 0.44pc to 22,570.26.
European shares rose 0.02pc and were set to gain 0.05pc this week.
Japan’s Nikkei fell 0.57pc after the Bank of Japan decided to start selling its holdings of risky assets. MSCI’s gauge of stocks across the globe rose 0.12pc to 980.42, hovering near a record high reached in the previous session, and was poised to add 0.85pc this week.
Investors are betting that central bank rate cuts will boost stocks further.
“For the next few weeks, our view is that we continue to keep risk-on orientation in our portfolios; we continue to overweight equities in the portfolio,” said Amelie Derambure, senior multi-asset portfolio manager at Amundi.
“Our stance is that the market should continue to creep higher in the coming weeks, with some volatility as always.” The Fed stopped short of endorsing market expectations for a clear string of rate cuts, emphasising a meeting-by-meeting, data-dependent approach. The Fed’s tone, along with the wide range of views within the central bank, disappointed some investors, who had hoped the stock market would be boosted by a rapid shift to lower rates, analysts said.
The yield on benchmark US 10-year notes rose 1.2 basis points to 4.116pc. The 2-year note yield, which typically moves in step with interest rate expectations for the Fed, fell 0.3 basis points to 3.565pc.
The US dollar strengthened 0.27pc to 0.794 against the Swiss franc but was down 0.11pc to 147.82 against the Japanese yen.
The euro was down 0.22pc against the dollar at $1.176. The British pound fell, down 0.45pc on the day at $1.34915 The Bank of England on Thursday kept rates on hold, but slowed the pace at which it is unloading the government bonds it purchased in previous crises.
European government bond yields rose, with Germany’s 10-year yield rising 2.2 basis points at 2.737pc. While shorter-dated bonds have benefited from expectations for rate cuts, longer-dated bond yields have risen on investor concern about government finances. The Bank for International Settlements warned this week that record global share prices appear increasingly disconnected from signals in the bond market that investors are concerned about government debt.
Oil prices were down, as traders’ worries about fuel demand outweighed the boost oil prices would typically get from a US rate cut.
Brent crude futures were 0.52pc at $67.08 a barrel, while US West Texas Intermediate futures lost 0.53pc, to $63.23.
Gold was up 0.51pc at $3,662.62, heading for its fifth straight week of gains.
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