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Gulf seen lower as FED dashes stimulus hopes

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"The most important question to rule out for the MENA region is a 2008 scenario"

August 2, 2012 11:54 by

Gulf markets are likely to track Asian shares lower on Thursday after the U.S. Federal Reserve dashed hopes by deferring fresh monetary stimulus.

U.S. stocks and Treasuries fell while the dollar rallied against the euro and yen on Wednesday. Asian shares are also lower on Thursday.

“The precedent of the last few years is that if things get really unruly and the markets react negatively, it will force the hands of the relative policy markets,” says Ibrahim Masood, senior investment officer at Mashreq bank.

“The most important question to rule out for the MENA region is a 2008 scenario,” he says, referring to the global financial crisis.

“If that holds, we shouldn’t be too bothered. There will be temporary volatility but I don’t think it will turn out to be a medium-term direction for our markets.”

Investor are now looking to the European Central Bank, which many anticipate will reveal a bond buying programme at the end of a two-day meeting on Thursday, aiming to cut soaring borrowing costs in Spain and Italy.

Most Gulf markets were higher on Wednesday on estimate-beating earnings and support from global markets.

In Kuwait, Zain, may see some support after saying it will not book an impairment in the third quarter for its keySudan unit after the Sudanese pound was devalued by 40 percent in a move that cuts the dollar value of the subsidiary’s earnings.

Kuwait Finance House (KFH) will also be in focus after its unit said it paid 67 million dinars ($237.6 million) for a 66.76-percent stake in Aref Energy.

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