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Crude may continue to depress markets; traders awaiting catalysts

Brent crude slipped below the $40 a barrel mark on Tuesday to levels last seen during the 2008-09 financial crisis

Middle East bourses may remain subdued on Wednesday as concerns over an oil supply glut continued to weigh on prices, meaning traders could sit out awaiting positive catalysts to buy back into the market.

Oil prices rose on Wednesday as U.S. crude stocks dipped, while in Asia Japan posted stronger-than-expected machinery orders and China announced an easing of import taxes, lending the market support amid a continuing supply glut.

This came after Brent crude slipped below the $40 a barrel mark on Tuesday to levels last seen during the 2008-09 financial crisis.

Gulf markets had been pummelled on Tuesday as oil fell, with Qatar’s benchmark index plunging to a two-year trough and Dubai’s bourse dipping to its lowest level in 2015.

“Visibility in the short term is poor,” said Sebastien Henin, head of asset management at Abu Dhabi’s The National Investor. “The lack of liquidity in the markets was magnifying price movements. Investors are simply not taking large bets to enter markets.”

One factor which may impact markets in the United Arab Emirates was economic data announced on Tuesday.

The UAE is expecting gross domestic product (GDP) growth of between 3 and 3.5 per cent in both 2015 and 2016, the country’s economy minister said on Tuesday. The expected figure for 2015 fell below the 4 per cent which the UAE central bank forecast for the year back in July.

Saudi Arabia’s index will also be watched after it breached technical support at 7,000 on Tuesday, closing down 2.5 per cent at 6,991 points, as financial and retail stocks led all sectors lower.

Egypt’s benchmark is braced for another day of aggressive selling from Arab investors, according to Cairo-based traders. They cut their positions heavily on Tuesday, according to bourse data, which helped push the Cairo bourse 2.5 per cent lower to 6,608 points.

Despite gyrating Egyptian stocks, the economy seems to be on a positive footing. New investments and large-scale projects will help accelerate GDP growth in the first quarter of 2015-2016, the planning minister told Reuters on Tuesday.

“With the injection of new investments, Gulf investment and financing packages, and new road projects, all of this will push us over the 5 percent level,” said Ashraf al-Arabi in an interview with Reuters.

(Reporting by Celine Aswad; Editing by David French)