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Stock markets in the United Arab Emirates ended higher on Friday on speculation the Federal Reserve is nearing the end of its monetary policy tightening cycle. Investors were betting that the Fed would only raise rates one more time in its rate-hiking campaign, after U.S. producer price data and labour market data on Thursday pointed to inflation cooling.
This came after CPI data on Wednesday showed a small rise in U.S. consumer prices in March. Most Gulf Cooperation Council countries, including the United Arab Emirates, 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.
Dubai's benchmark index gained 0.1%, helped by a 0.8% rise in blue-chip developer Emaar Properties. The index posted its fourth weekly gain of 2.4%, its biggest weekly gain since September. However, the index's losses were limited by a 1.7% slide in Salik as the toll operator traded ex-dividend.
In Abu Dhabi, the index finished 0.7% higher, with conglomerate International Holding advancing 0.8%. Oil prices - a key catalyst for the Gulf's financial markets - rose after the West's energy watchdog said it expected global demand to rise to a record high this year on the back of a recovery in Chinese consumption.
Oil headed for a fourth straight week of gains, supported by signs of a tightening global market as the International Energy Agency warned of higher prices.
West Texas Intermediate traded near $82 a barrel, taking its weekly advance to about 2% and the longest winning run since June. The rally had been driven by improving fundamentals after OPEC+ cut supplies, with brisk buying seen in both Europe and Asia. Key market timespreads signal firmer conditions.
The Organization of Petroleum Exporting Countries said Thursday the market was set for a hefty supply deficit that’ll widen as the year progresses. The latest output cuts by the group threaten to boost oil prices for consumers already facing high inflation, the IEA said in its monthly outlook on Friday.
Crude has rebounded strongly since hitting a 15-month low in March as OPEC and its allies surprised the market with a significant output cut. The move lifted prices by the most in a year, punishing speculators betting oil would fall. The gains have also been driven by declining US stockpiles, weaker flows from Russia, and interruptions to pipeline supplies from Iraqi Kurdistan.
Morgan Stanley expects the rally Dubai’s in property prices to continue this year — even after a 20% jump since 2020 — due to cash buyers, yield-hunting investors and the reopening of China.
Prices are likely to be remain high because about 80% of property sales in Dubai are cash based and so less impacted by interest rates, investors will continue to be drawn by attractive rental yields and a pick up in Chinese investors will buoy demand, analyst Nida Iqbal wrote in a report dated April 13.
Demand for Dubai real estate is booming after the government’s handling of the pandemic and its liberal visa policies attracted more foreign buyers. The city is also benefitting from an influx of wealthy investors such as Russians seeking to shield their assets, crypto millionaires and rich Indians seeking second homes.
The average home price in Dubai climbed 12.8% in the 12 months through March 2023, while the average residential rent surged 26.3% over the same period, according to real estate adviser CBRE Group Inc.
