STOCKS in Dubai tumbled from nearly seven per cent yesterday, adding to a bearish period that has seen equities sink in recent weeks.
The main indexes in Dubai and Saudi Arabia dropped by 6.5 per cent in trading yesterday.
Global markets took a big hit at the end of last week as investors fled to the safety of government bonds after a raft of weak indicators from Europe and China collided with concerns about the US Federal Reserve’s plans to reduce monetary stimulus.
The FTSE 100 fell on Friday to 6,339.97 – seven per cent below its last peak in early September while the S&P 500 in the US has fallen 5.5 per cent since mid-September.
The last month has also seen stocks in France and Germany falling 10 and 12 per cent respectively.
Economists at the International Monetary Fund last week downgraded growth for the Eurozone and just prior to that, China, the worlds second largest economy.
Headline bond prices rose over the same period, suggesting investors were swapping out of stocks in order to buy safer bonds.
This type of behaviour is typically associated with an expected decline in the health of the economy.
Meanwhile, Brent crude oil prices have plummeted to $90 a barrel from $115 in just a few months, a further signal that the prospects for global demand are weakening.
However, consultancy Capital Economics has offered reassurances regarding the UK.
The FTSE 100 reflects global health, not just that of the UK so it is possible that the behaviour of it does not reflect the UK’s growth outlook.
It may also have been impacted by the recent strengthening of the pound which Capital Economics says tends to push down equity prices.
The rise of the pound is a sign of confidence in the UK economy, however, so signals that markets expect the UK to continue its recovery.