Two central banks may hold the fate of equity markets in their hands (page 2 of 2)

Note, however, that the ECB has made it very clear it will not intervene without the EFSF stepping in first, which means we are back to austerity measures. Hence, it appears that struggling sovereigns may have no choice but to give into the EFSF/ESM's conditions, and by extension Germany's, if they want to avoid defaulting on their debt. In any event, conditioned procrastination in Italy and the uncertainty about a possible Spanish bailout creates downside opportunity for equity markets. Yet, the question remains: can the ECB convince the market it has the crisis under control?

What does this mean for equity markets in the Middle East?

During the European crisis stock markets have through sentiment been either directly or indirectly, surrounding oil/gold/etc, affected. Yet, this hasn't stopped some markets in the ME from pushing higher. In fact, the Dubai financial market has risen over 15% year-to-date.

Note, however, there are fundamental reasons why the DFM General has been able to rally so much harder than most other major stock markets. The most important factor is the rebound we have seen in the Dubai's property market. But should the market be higher? (It is after all nowhere near pre-financial crisis levels) In our humble opinion: yes. So, the end result is that global uncertainty, centered on the US and Europe, may be holding back the DFM from regaining some of its previous stature. And, with central banks dominating investor sentiment, I would be watching them closely for hints of more stimulus/monetary easing.