Investors primed for earnings reports

Investors will turn their attention this week to global cues such as rising interest rates in Europe and improving jobs figures from the US.

Job seekers line up to attend the New York City Startup Job Fair.

Investors will be watching for global cues this week as Europe confronts higher interest rates and the US digests improving employment figures.

The European Central Bank last Thursday increased the euro zone's main interest rate to 1.25 per cent from 1 per cent, the first increase since 2008.

International markets responded positively to the news on Friday.

"It makes sense to curtail inflation, [providing] room to protect the recovery of the economy," said Haissam Arabi, the chief executive of Gulfmena Alternative Investments in Dubai.

New US data last week showed that jobless claims declined by 6,000 to 388,000 while the unemployment rate fell from 8.9 per cent to 8.8 per cent. "The claims are the lowest we have seen in three months," Mr Arabi said.

Regional markets will also be monitoring oil prices and possibly the first trickle of first-quarter earnings reports. Mr Arabi said analysts were expecting the first strong season for earnings in some time.

The performance of Gulf bourses was mixed last week. The Abu Dhabi Securities Exchange General Index slipped 0.4 per cent to 2,597.08, while the Dubai Financial Market General Index was little changed at 1,555.41.

"There is an increased level of confidence for the UAE and the Gulf markets in general," said Saleem Khokhar, a fund manager at National Bank of Abu Dhabi. "There has already been a stream of dividend payments, considered fair and good, last week, which has helped improve sentiment."

Last week, Abu Dhabi Islamic Bank paid a dividend of 21 fils a share, while Emaar Properties paid 10 fils a share.

In Saudi Arabia, petrochemical companies are expected to show the strongest growth for the quarter.

"The numbers expected for the petrochemical sector are quite strong and the reasons for that are multiple," Mr Khokhar said. "There has been better growth generally, but oil prices have been strong over the period and averaging at over US$100 a barrel."

The Saudi Tadawul All-Share Index moved 0.52 per cent higher yesterday to 6,608.60.

Oil traded at a 30-month high after a fire at Libya's Sarir field on Friday. On the New York Mercantile Exchange, crude for May delivery rose as much as $1.38, or 1.3 per cent, to $111.68. Brent crude for May added $1.78, or 1.5 per cent, reaching $124.45 a barrel on the ICE Futures Europe Exchange in London.

Nigeria's elections could move oil prices considerably higher if they feature violent clashes, said Hussein Allidina, the head of commodity research at Morgan Stanley in New York. Voting for parliament began yesterday, the presidential election is scheduled for next Saturday, and voting for state governors is to take place on April 26.

"The current market focus on civil unrest in the [Middle East and North Africa] region is warranted, but potential risks in Nigeria deserve careful consideration, too," Mr Allidina said. "Oil infrastructure could be targeted by militants during the election period."

In Qatar, several banks are expected to report on first-quarter earnings in coming weeks. Qatar Islamic Bank is expected to report its results on Wednesday, while Al Khalij Commercial Bankis to report next Sunday and Commercial Bank of Qatar on April 20.

"Those banks are very undervalued relative to" Qatar National Bank (QNB), Mr Arabi said. QNB last week reported a 35 per cent increase in first-quarter net income to 1.7 billion rials compared with the first quarter last year. "Depending on how their results come out, it can be a chance for those banks to bridge the gap in their valuations."

Qatar's benchmark ended last week 2.4 per cent higher at 8,668.64.

Several Egyptian companies are expected to distribute dividends this week.

Sinai Cement and Orascom Construction Industries are to distribute dividends tomorrow. Sinai is expected to pay a cash dividend of 9.50 Egyptian pounds a share, and Orascom is expected to pay $1 of cash a share. Egypt's EGX30 Index retreated 2.3 per cent last week to 5,425.98.

Elsewhere in the region, Kuwait's measure rose 1.2 per cent last week to 6,348.30, Bahrain's slipped 0.4 per cent to 1,411.17, and Oman's rose 1.2 per cent to 6,309.35.