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Dubai: Global equities and oil tumbled as the fear of the financial crisis metamorphosing into a global recession gripped the markets on Wednesday.
In the UAE and the Gulf markets, investors took profits after stocks ended lower overnight on Wall Street and Asian stocks retreated as a global market rally ran out of steam.
The Dubai Financial Market, which surged more than 22 per cent over the past two days, closed down 7.44 per cent as the Abu Dhabi index which also gained 15 per cent over same period dropped 2.13 per cent.
Analysts and fund managers said that profit-taking will keep the market volatile in the weeks ahead.
Profit booking
Shehab Gargash, chairman of Daman Investments said yesterday that it is difficult to sustain the type of recovery the market witnessed in the last two days. "It is a reaction to the over-reaction of previous days," he said.
"Profit booking was but natural after seeing the last two days sharp rise in the markets.
"One has to be very cautious on the long positions and keep the tight stop losses to safeguard from the volatility as booking an early loss is far better than holding it on hopes of the rise resulting in the increase of loss," said Shiv Prakash Equity Investment Analyst - Technical of Mac Capital Advisors.
The Saudi stock market recovered initial losses of eight per cent to close up 0.5 per cent at 6,863.15 after the leading petrochemicals and banks sectors rebounded.
The Doha Securities Market index slipped 3.3 per cent as the Kuwait and Muscat indices dropped 0.64 per cent and 0.03 per cent, respectively.
Governments across the Gulf took steps to support their financial systems after stock markets suffered heavy losses last week.
On Tuesday, the UAE pumped Dh70 billion into the inter-bank market, bringing a total of Dh120 billion pledged since the beginning of the crisis. On Monday the UAE government announced that it would guarantee all bank deposits in the country including those with foreign commercial banks.
Earlier this week other Gulf governments also announced a series of measures to shore up the financial system.
Saudi Arabia, Kuwait and Bahrain have slashed interest rates and pledged tens of billions of dollars of liquidity to domestic banks. Qatar also decided to buy between 10 per cent and 20 per cent of bank shares.
New data
New US data showed that retail sales slumped 1.2 per cent in September. The drop was the steepest since August 2005, further aggravating the fear that the fin-ancial crisis will mutate into a worldwide recession.
Growing worries about a worldwide slowdown and the crisis in the money markets saw Wall Street shares sliding 1.75 per cent in early trading. The FTSE 100 fell 5.25 per cent, and in Asia Hong Kong's Hang Seng closed down 5 per cent.
The recession fears were also reflected in the currency and commodities markets. The euro was down 1.4 per cent at 137.37 yen and down 0.2 per cent at $1.3587. Sterling rose 0.8 per cent to $1.7549.
Oil prices fell on Wednesday to their lowest level in 13 months, dragged down by expectations that economic weakness will cut further into demand for crude. US crude fell to $75.62 a barrel, the lowest since September last year.
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