Middle East shares tumbled, sending Dubai’s index down the most since February, after Standard & Poor’s cut the credit rating of the U.S. for the first time and amid rising concern the global economy is faltering.
Emaar Properties PJSC (EMAAR), developer of the world’s tallest tower, slumped 5.3 percent. Arabtec Holding Co. (ARTC) dropped the most since March after it said second-quarter profit fell 74 percent. The DFM General Index (DFMGI) lost 3.7 percent, the most since Feb. 28, to 1,484.31 at the 2 p.m. close in Dubai. The measure has plunged 12 percent from this year’s high in April, entering a so-called correction. Israel’s TA-25 Index slumped 6 percent, the most since November 2008, at 3:51 p.m. in Tel Aviv.
“We’re playing catch-up and trying to anticipate and price in the response to the downgrade by global markets tomorrow,” said Julian Bruce, equity sales head at EFG-Hermes Holding SAE in Dubai. “The impact on stock prices that we’re seeing reflects the feelings of uncertainty” about global growth, he said.
Global stocks tumbled last week as investors fled equities amid signs the world’s largest economy is stalling. S&P downgraded the AAA credit rating of the U.S. on Aug. 5 by one level to AA+, while keeping the outlook at “negative.” The rating may be cut to AA within two years if spending reductions are lower than agreed to, interest rates rise or “new fiscal pressures” result in higher general government debt, the New York-based firm said.
U.S. and European shares posted their biggest weekly losses since November 2008. The S&P 500 plunged 7.2 percent and the Stoxx 600 Europe Index tumbled 9.9 percent. The European Central Bank left interest rates unchanged on Aug. 4 as economic growth slows and the region’s debt crisis spreads to Italy and Spain.
Oil for September delivery tumbled 9.2 percent last week to $86.88 a barrel on the New York Mercantile Exchange. The six nations of the Gulf Cooperation Council supply about a fifth of the world’s oil.
Emaar fell the most since March 2 to 2.88 dirhams. Arabtec, the United Arab Emirates’ biggest construction company by market value, tumbled 6.3 percent, also the most since March 2, to 1.34 dirhams. Second-quarter profit dropped to 28.97 million dirhams ($7.9 million) from 111 million dirhams a year earlier. The mean estimate of six analysts was for a profit of 44 million dirhams, according to data compiled by Bloomberg.
Oman’s MSM 30 Index decreased 1.9 percent. Abu Dhabi’s ADX General Index (ADSMI) and Qatar’s QE Index (DSM) lost 2.5 percent. Kuwait’s gauge decreased 1.6 percent to the lowest since September 2004. Bahrain’s BB All Share Index slipped 0.3 percent, while Saudi Arabia’s Tadawul All Share Index (SASEIDX) rose less than 0.1 percent after tumbling 5.5 percent yesterday.
Israel’s TA-25 Index slid to 1,085.44 and is down 19 percent from a record high on April 21. The open of trading in Israel was delayed by an hour after circuit breakers went into effect as the opening auction indicated a 5 percent decline. The yield on the 5 percent Mimshal Shiklit government bonds due January 2020 rose five basis points, or 0.05 percentage point, to 4.95 percent.
“If there’s a storm globally, it’s going to affect Israel, which has very large exports to the U.S. and the eurozone,” said Ron Eichel, chief economist and strategist at Meitav Investment House Ltd. in Tel Aviv. “It could be a turbulent market in the next few weeks.”
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