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Gulf Stock Markets Dip Amid Fed Rate Hike Concerns and Debt Ceiling Deal Prospects

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BNN Correspondents
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An investor monitors a screen displaying stock information at the Abu Dhabi Securities Exchange June 25, 2014
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Image Credit: Reuters/File Photo

 Investor focus on potential Federal Reserve interest rate hikes affects Gulf markets.

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Most stock markets in the Gulf witnessed a downward trend on Sunday as investors turned their attention to the possibility of more Federal Reserve interest rate hikes while the U.S. approaches a deal to raise its debt ceiling. Given that most Gulf Cooperation Council countries, including Saudi Arabia, have their currencies pegged to the U.S. dollar and generally follow the Federal Reserve's policy decisions, the region is directly impacted by any monetary tightening in the United States. Saudi Arabia's benchmark index, TASI, experienced a 0.4% decline, with Al Rajhi Bank falling 1% and Dr. Sulaiman Al-Habib Medical Services finishing 1.4% lower. However, oil giant Saudi Aramco managed to add 0.2% to its value.

Oil prices, a significant catalyst for the Gulf's financial markets, showed a slight increase on Friday. This was attributed to U.S. officials nearing a debt-ceiling agreement and the market grappling with conflicting messages on oil supply from Russia and Saudi Arabia ahead of the next OPEC+ policy meeting. In Qatar, the index experienced a 0.3% decrease, largely influenced by a 2.6% slide in the telecoms firm Ooredoo.

Egypt defers payments for wheat purchases amidst currency shortage.

Moving beyond the Gulf region, Egypt's blue-chip index saw a 0.5% gain, driven by an impressive 11.3% jump in Edita Food Industries. However, in a separate development, Egypt has decided to defer payments for its substantial wheat purchases. This decision, as confirmed by a government official and traders, comes in response to the country's shortage of hard currency. Egypt, being one of the world's largest wheat importers, relies on these purchases to provide heavily subsidized bread to millions of its citizens. Any adjustments to the subsidy system are politically sensitive given its widespread impact.

As Gulf markets face uncertainty due to potential interest rate hikes, and Egypt deals with its currency shortage and subsidy challenges, investors and analysts will closely monitor these developments to assess the broader economic implications in the region.

MarketVolatility FederalReserve InterestRateHikes GulfStockMarkets StockMarketTrends
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