Development in Global Markets to Weigh on Regional Equities

Global equity markets were broadly positive during the week, but the news flow was mixed with encouraging vaccines developments compared to renewed restrictions to curb recent spike in new cases. The US jobs data released depicted worse than expected initial jobless claims, which further substantiates that the economic recovery will remain uneven and choppy. 

Additionally, the lack of clarity on stimulus package is also making the markets nervous, although the broader hopes of a vaccine is continuing to push the rotational trade into cyclical sectors. Oil prices surged by 5.10% during the week on the back of positive incoming vaccine news; however, resurgence in COVID-19 cases and new lockdowns capped the upside. 

For the MENA region, optimism over a COVID-19 vaccine and surging oil prices have pushed markets higher during the week and the month.  For the week, 5 out of the 7 regional indexes closed in green, while 2 closed in red. Dubai was the best performing index regionally with gains of 2.35%, followed by 1.70% in Saudi Arabia and 1.19% in Abu Dhabi. On the other hand, Egypt was the worst performing index regionally with losses of 1.08%. 

Going forward, trading activity might continue to be broadly driven by news flow on number of new cases and economic data. Equity markets are likely to remain range bound in the coming week as investors will closely monitor the surge in new cases, which could lead to more stringent restrictions and impact the economic recovery. 

For the MENA region, the development in global markets will weigh on regional equities as further restrictions on economic activity will lead to downward pressure on oil prices. Hence, regional investors might remain cautious over the changing dynamics and wait for more clarity to buy into markets at current levels.