Markets bounce back as oil prices recover
Stock markets across the globe - including the UAE, GCC - bounced back on Tuesday after the massive selloff witnessed the previous day, helped by a recovery in oil price and hopes of a stimulus package by the US .
The UAE and Saudi Arabia led the recovery with Dubai and Abu Dhabi indexes jumping 7.3 per cent and 5.5 per cent respectively. Recovery in the UAE bourses was led by gains in Aramex, Air Arabia, Dubai Islamic Bank, Emaar Properties, Sharjah Islamic Bank, Abu Dhabi Commercial Bank etc.
Saudi Arabia's Tadawul also made a smart gain of 7.1 per cent after oil price war concerns eased a bit as Russia signaled a possible cooperation with Saudi-led Opec. Among other regional bourse, Qatar index gained 3.3 per cent, Bahrain rose 1.5 per cent, Muscat index closed 0.7 per cent higher, and Boursa Kuwait inched up 0.3 per cent. Most of the GCC markets were trading significantly higher in the early trade, but later lost momentum, yet still ended in the positive territory.
Total market capitalisation of the GCC market jumped by almost $125 billion (Dh459 billion) on Tuesday. Brent was trading $2.8 a barrel, or 8.2 per cent higher at $37.17 a barrel while WTI was up $2.5 or 8.0 per cent to $33.62 per barrel on Tuesday evening after sinking 25 per cent in the previous day.
"In line with increase in oil prices, investors in UAE and GCC stocks markets breathe a sigh of relief as stocks recover part of the losses. Investors in the UAE and GCC regions recovered part of their wealth lost over the past few days," said Vijay Valecha, chief investment officer at Century Financial.
After the coronavirus scare, markets were hammered by Russia and Saudi Arabia oil price war concerns on Monday. According to a United Nations Conference on Trade and Development report, a percentage point drop in global growth costs some $900 billion in lost income, most forecasts have wiped $1 trillion of global income for this year. If growth comes in at 1.7 per cent, the cost of the virus will be closer to $2 trillion, it said.
In Asia, the Shanghai Composite Index rose 1.8 per cent to 2,996.76 and the Nikkei 225 in Tokyo advanced 0.9 per cent to 19,867.12. Hong Kong's Hang Seng climbed 1.4 per cent to 25,392.51. The Kospi in Seoul added 0.4 per cent to 1,962.93 and Sydney's S&P-ASX 200 rose to 5,939.60. Markets in India were closed for holiday. In Europe, London's FTSE 100 was up 3.8 per cent to 6,193 and Frankfurt's DAX advanced 3.2 per cent to 10,965. The CAC 40 in France gained 3.8 per cent to 4,885.
In the US, Wall Street stocks bounced early Tuesday, recovering some of the losses from the prior session's rout, in anticipation of stimulus measures to address the economic hit from coronavirus. About 15 minutes into trading, the Dow Jones Industrial Average stood at 24,484.20, up 2.7 per cent. The broad-based S&P 500 surged 2.5 per cent to 2,814.92, while the tech-rich Nasdaq Composite Index advanced 2.6 per cent to 8,159.77.
US president Donald Trump said that he will taking a "major" step to help the US economy avoid the impact of coronavirus outbreak. The US president will also discuss payroll tax cut with the Republicans.
"Markets are surging on hopes of a huge stimulus plan from [US President] Donald Trump, but will it be enough to reverse the selloff?" said analyst Joshua Mahony at trading firm IG.
"The stock market rally has always been a key proof of success for Donald Trump, and what has been happening in the market recently may pull the carpet from under his feet during the critical year of presidential election. So, if the Fed emergency action couldn't give the market a jolt, then it wouldn't be a surprise to see Donald Trump stepping in with massive fiscal measures to save the year," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.