Most stock markets in the Gulf fell on Tuesday with the U.S. Federal Reserve set to begin a two-day meeting at which it is expected to decide to raise interest rates by another 25 basis points. The Fed will announce its decision on Wednesday, having already lifted its policy rate by 475 basis points since March last year into a 4.75%-5.00% range from near zero.
Most Gulf Cooperation Council countries, including Saudi Arabia, the United Arab Emirates and Qatar, have their currencies pegged to the U.S. dollar and follow the Fed's policy moves closely, exposing the region to a direct impact from monetary tightening in the world's largest economy.
Saudi Arabia's benchmark index extended the previous session's losses, dropping 0.6%, with Al Rajhi Bank down 1.2% and oil giant Saudi Aramco off 1.7%.
The Saudi stock market broke its uptrend as investors booked gains after the main index put in a strong performance in recent weeks, said Ahmed Negm, Head of Market Research MENA at XS.com. "Investors' reaction also comes as central bank meetings draw closer with some uncertainty over interest rate decisions and future guidance."
Abu Dhabi's index fell 0.4%, but Dubai's rose 1.1%, helped by a 2.3% jump in Emirates Central Cooling Systems. The Qatari benchmark closed 0.6% higher, with Mesaieed Petrochemical Holding Company up 2.8%.
Outside the Gulf, Egypt's blue-chip index eased 0.1%. According to Negm, the Egyptian market was volatile as local investors joined their international counterparts in selling stocks. The market could continue to see downward pressure as investor sentiment could deteriorate further, he said.
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