(MENAFN- Arab Times) Saudi stocks dived 17.2 percent in August to lead a slide in other Gulf bourses which came under pressure from a sharp decline in oil prices and China's economic woes. Global equities were hammered last week as risk-averse investors dumped shares on spreading panic that the flagging Chinese economy - the world's second largest - could spark a new worldwide recession. The August decline in the Gulf wiped out all gains made by its seven stock markets since the start of the year, with all dipping into the red.
The Gulf states depend heavily on oil as a main source of income, and China is a major trading partner and the most important market for Middle East crude. The decline also came following a string of negative economic reports that said the six Gulf states will lose around $300 billion in oil revenues and end 2015 with a budget shortfall. The Saudi Tadawul All- Shares Index dropped 2.2 percent on Monday to end the month on 7,522.47 points. It is 9.7 percent down on the year. Dubai Financial Market Index was the second biggest loser, dipping 11.6 percent in August to close the month on 3,662.56 points.
The index is 1.7 percent lower than last year's finish. Oman dived 10.5 percent, Abu Dhabi shed 7.0 percent and Kuwait slumped 6.9 percent. All of them are below the 2014 close. Qatar Exchange, the second largest in the Gulf after Saudi Arabia, made a comeback in the last two days of the month to cut its monthly losses to just 1.9 percent.
However, it is still down 5.9 percent on the year. The Bahrain bourse dropped just 2.4 percent in August, and is 8.9 percent lower than last year's close. Meanwhile, Kuwait stocks swung sharply lower on Monday to end the month on a sour note. The price index slumped 83.56 pts in a broad decline to 5820.56 points led by banks and other heavyweights even as oil prices weakened after showing signs of firming up in the recent sessions. Among the prominent losers, sector bellwether National Bank of Kuwait dropped 20 fils to KD 0.780 after trading 2.5 million shares and Kuwait Finance House was down by same measure to wind up at KD 0.580.
Investment conglomerate KIPCO too shed 20 fils and Kuwait Food Co (Americana) retreated 20 fils to settle at KD 2.140. World stock indexes fell while oil prices dropped on Monday amid persistent investor concerns about slowing growth in China and the prospect of higher US interest rates.
The dollar eased as weaker stock markets prompted investors to trim bets against currencies popularly used to fund risky carry trades. But the dollar's losses were limited by weekend comments from Federal Reserve policymakers that left the door open to a US rate rise as soon as next month. The US dollar index, which measures the greenback against a basket of currencies , was down 0.1 percent. Fed Vice-Chairman Stanley Fischer said in a speech at the annual Jackson Hole, Wyoming, central bankers' symposium that US inflation was likely to rebound, allowing rates to rise gradually. US stocks started the week down on the rate outlook jitters, extending recent market volatility. "The market turmoil will continue in the near future.
China is the catalyst, but the real reason for the selloff is the nervousness about the first US rate hike," KBC senior economist Koen De Leus said. At 10:30 a.m. (1430 GMT), the Dow Jones industrial average was down 114.72 points, or 0.69 percent, to 16,528.29, the S&P 500 had lost 13.24 points, or 0.67 percent, to 1,975.63 and the Nasdaq Composite had dropped 28.79 points, or 0.6 percent, to 4,799.53. The pan-European FTSEurofirst 300 stocks index fell 0.3 percent and, even though it has recouped all of last week's losses, was on track for its worst monthly performance since August 2011. Germany's DAX was down 0.6 percent. Brent crude oil fell back below $49 a barrel after its biggest two-day rally in six years last week.
Chinese shares had another volatile session. The CSI300 index ended up 0.7 percent, after falling 4 percent at one point. The index was still down 11.8 percent for August. The uncertainty about when the Fed might raise rates kept yields on German government bonds, the euro zone benchmark, close to last week's highs. Ten-year yields were marginally higher at 0.74 percent. In the US bond market, benchmark 10- year Treasuries notes were up 9/32 in price to yield 2.154 percent. In the oil market, Brent was down $1.07 a barrel at $48.98 and, despite last week's gains, heading for its fourth consecutive monthly decline. US crude was down 87 cents at $44.35. Gold struggled over the Fed outlook, trading around $1,131.80 an ounce.
Wall Street opened the week in the red after comments from Federal Reserve Vice-Chairman Stanley Fischer over the weekend appeared to keep the door open for a rate hike in September. US inflation will likely rebound as pressure from the dollar fades, allowing the Fed to raise interest rates gradually, Fischer said at the global central banking conference in Jackson Hole, Wyoming. Fischer's remarks suggest the Fed could look beyond a week of stock market turmoil brought on by persistent fears that China's economy is faltering. A decade of near-zero interest rates has helped the US stock market stage a spectacular bull-run since the financial crisis. But fears about the health of the Chinese economy buffeted global stock markets this month and pushed prices of oil and other commodities lower.
The S&P 500 and the Nasdaq composite look set to post their biggest monthly loss since May 2012, while the Dow Jones industrial average is on track for its worst monthly loss since 2010. Wall Street closed flat on Friday after a tumultuous week in which the Dow slumped more than 1,000 points at one point last Monday. The market subsequently rallied, posting its biggest twoday gain since the financial crisis.
The CBOE Volatility index - known as Wall Street's fear gauge - rose about 7 percent to 27.80 on Monday, above its long-term average of 20. In China, stock markets had another volatile session. The Shanghai Composite lost 0.8 percent, while the blue-chip CSI300 index ended up 0.7 per-cent. Both were down more than 4 percent at one point. At 9:45 a.m. ET (1345 GMT), the Dow was down 156.87 points, or 0.94 percent, at 16,486.14, the S&P 500 was down 14.94 points, or 0.75 percent, at 1,973.93 and the Nasdaq Composite was down 23.20 points, or 0.48 percent, at 4,805.12.
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