Gulf Markets React to Q2 Earnings and Trade Threats
The Gulf markets were a mixed bag on Sunday as traders struggled to make sense of two major factors: Q2 earnings reports and a new wave of trade threats from the White House. Donald Trump is planning to impose 15% to 20% tariffs on all goods coming from the European Union, with his team considering reciprocal tariffs above 10% even if a deal is signed.
Saudi Arabia’s Stocks Take a Hit
In Saudi Arabia, stocks opened strong but failed to hold up, with the Tadawul index dropping 0.4% and extending its losing streak to nine consecutive sessions, the longest in nearly two years. The decline was broad-based, with banks, mining, and retail sectors all in the red. Saudi National Bank, the kingdom’s largest lender, dipped 0.8%, while Saudi Arabian Mining Company lost 1.3% after announcing the voluntary retirement of its chief financial officer. Fawaz AbdulAziz Al Hokair & Co., a retail and real estate firm, crashed 10% after investors reacted negatively to its deal to sell 49.95% of itself to Al Futtaim Retail, an Emirati group, for 2.5 billion riyals, approximately $666 million.
Qatar and Egypt Buck the Trend
Qatar, on the other hand, saw its main stock index rise 0.2%, powered by a 1.2% gain in Industries Qatar, a petrochemical giant. This modest climb brought the market closer to a two-year high, with the mood remaining steady thanks to strength in the chemical sector. Egypt’s EGX30 index also performed well, climbing 0.7% and hitting a record high. The rally was driven by growing optimism around Egypt’s stalled $8 billion IMF deal, with Finance Minister Ahmed Kouchouk expressing confidence that the country would meet its reform milestones and wrap up the delayed review by September or October.
ECB Holds Steady Amid Trade Uncertainty
In Europe, the focus is on whether banks can maintain their earnings momentum. Citi described Q1 as "remarkably resilient," and analysts expect Stoxx 600 EPS to finally turn positive on a yearly basis. The weight is falling mostly on banks, as luxury, auto, and energy stocks have been seeing downward revisions. Unicredit will post its results on Wednesday, with the Italian lender having upped its stake in Commerzbank to 20%, but hitting a wall in its push to buy Banco BPM. The European Central Bank is expected to hold interest rates at 2% during Thursday’s meeting, with President Christine Lagarde unlikely to be swayed by Trump’s latest trade threats.
Warning Signs Ahead
However, there are warning signs ahead. If the US pushes ahead with a 30% tariff on EU imports, it’s widely expected that the ECB will be forced to cut rates. Markets have until September 11 to measure the fallout, with the ECB taking its summer break after this week’s session. Deutsche Bank’s macro strategist has warned that inflation risks in Europe are being ignored, and that traders aren’t factoring in the full impact of Trump’s tariffs yet. With the August 1 deadline looming for US-EU talks, he warned that if things fall apart at the last minute, the result could be a very sharp market reaction.
Conclusion
In conclusion, the Gulf markets are navigating a complex landscape of Q2 earnings reports and trade threats. While some markets, such as Qatar and Egypt, are performing well, others, like Saudi Arabia, are taking a hit. The European Central Bank is holding steady for now, but warning signs are ahead, and markets will need to remain vigilant to respond to any changes in the trade landscape. As the situation continues to evolve, one thing is clear: traders will need to stay on their toes to navigate the challenges and opportunities that lie ahead.
