Gulf Markets Mixed as Earnings Reports and Tariff Threats Drive Volatility

Gulf markets closed mixed on Sunday as investors grappled with two significant factors: the release of Q2 earnings reports and renewed tariff threats from the White House. The market's reaction was varied, with Saudi Arabia's Tadawul index dropping 0.4% and extending its losing streak to nine consecutive sessions, the longest in nearly two years. The decline was broad-based, affecting sectors such as banking, mining, and retail. Saudi National Bank, the kingdom’s largest lender, dipped 0.8%, while Saudi Arabian Mining Company lost 1.3% following the voluntary retirement of its chief financial officer. The most significant decline was seen in Fawaz AbdulAziz Al Hokair & Co., a retail and real estate firm, which crashed 10% after announcing the sale of 49.95% of its shares to Al Futtaim Retail for approximately $666 million.

In contrast, Qatar's main stock index rose 0.2%, driven by a 1.2% gain in Industries Qatar, a petrochemical giant. This modest climb brought the market closer to a two-year high, with strength in the chemical sector contributing to the positive sentiment. Unlike Saudi Arabia, Qatar did not experience any major corporate shake-ups or negative news that could have dragged down the market.

Egypt's EGX30 index climbed 0.7% and hit a record high, buoyed by growing optimism around Egypt’s stalled $8 billion IMF deal. Finance Minister Ahmed Kouchouk expressed confidence that Egypt would meet its reform milestones and complete the delayed review by September or October. Additionally, Bonyan Development and Trade launched an IPO that was oversubscribed over 33 times, further boosting market sentiment. Plans to raise $4 billion through international bonds over the next year also contributed to the positive outlook, although these plans could not be confirmed.

The renewed tariff threats from the White House added to the market's volatility. President Donald Trump's proposal to impose at least 15% to 20% tariffs on imports from the European Union, along with potential reciprocal tariffs above 10%, created uncertainty among investors. The European Central Bank is expected to hold interest rates at 2% during its upcoming meeting, with policymakers indicating that the meeting will not be derailed by the latest trade threats. However, there is a warning that if the U.S. proceeds with a 30% tariff on EU imports, the ECB may be forced to cut rates. Markets have until September 11 to assess the potential fallout from these developments.

Analysts have called the first quarter "remarkably resilient," and now expect the Stoxx 600 EPS to turn positive on a yearly basis. The focus is on whether banks can sustain this momentum, as luxury, auto, and energy stocks have seen downward revisions. Unicredit, an Italian lender, is set to post results on Wednesday and has been in the headlines after increasing its stake in Commerzbank to 20%. However, a court blocked its push to buy Banco BPM, demanding more clarity before allowing the deal to proceed. Despite this setback, Unicredit’s stock is up more than 50% this year, providing some breathing room for CEO Andrea Orcel.

The market's reaction to these developments highlights the delicate balance between earnings reports and geopolitical risks. Investors are closely monitoring the situation, with the potential for sharp market reactions if trade talks between the U.S. and the EU fall apart. The coming weeks will be crucial as markets await further developments and assess the impact on their portfolios.