UAE stocks inched up on Tuesday as fresh data showed the country's non-oil economy continued to expand at a solid pace, even with oil prices hovering above $100 a barrel and OPEC+ choosing to keep production levels unchanged for November.
The S&P Global UAE Purchasing Managers' Index (PMI) held steady at 55.3 in September, matching August's 20-month high. Any reading above 50 signals expansion, so the latest figure points to sustained momentum in the non-oil private sector, which includes everything from tourism and retail to construction and financial services.
Abu Dhabi's FTSE ADX General Index and Dubai's DFM General Index both finished slightly higher, as investors weighed upbeat local growth signals against a volatile energy market and global rate uncertainty.
What the PMI tells us
The PMI is a monthly survey of purchasing managers at private-sector companies. It tracks new orders, output, employment, and supplier delivery times. A reading above 50 means activity is expanding; below 50 signals contraction. September's 55.3 is comfortably in expansion territory and matches the strongest pace seen in nearly two years.
According to the survey, output growth accelerated and demand improved, suggesting that businesses in the non-oil sector are still seeing healthy order books. However, the report also highlighted that input costs rose, a trend that could squeeze profit margins for some firms and feed into consumer prices down the line.
David Owen, an economist at S&P Global Market Intelligence, noted that the data points to a resilient non-oil economy, but he also flagged that rising cost pressures remain a watchpoint. The UAE has been working to diversify its economy away from hydrocarbons, and the non-oil sector now accounts for a significant share of GDP.
Oil and OPEC+ in the background
Oil prices have been a key driver for Gulf markets, and they remained elevated above $100 a barrel during the session. High energy prices are generally a tailwind for the UAE, a major oil exporter, as they boost government revenues and support the broader economy. But they also raise concerns about global inflation and demand destruction, which can weigh on investor sentiment.
OPEC+ — the group of major oil producers led by Saudi Arabia and Russia — decided to keep its November output targets unchanged. That decision came as a surprise to some traders who had expected a further cut to support prices. The group's move suggests it is comfortable with current supply levels, at least for now.
The combination of firm oil prices and steady non-oil growth helped lift UAE equities, though gains were modest. Investors are also keeping an eye on global interest rates, as higher rates can pull money out of emerging markets and into safer assets. The recent cooling in US rate hike expectations has provided some relief, as seen in Gulf stocks edging higher in recent sessions.
What it means for investors
For everyday investors, the steady PMI reading is a reassuring sign that the UAE's economy is holding up well despite a mixed global backdrop. A resilient non-oil sector supports corporate earnings, which in turn underpins stock prices. It also suggests that the government's diversification efforts are paying off, reducing the economy's reliance on oil price swings.
However, investors should be aware of the risks. High oil prices, while beneficial for the UAE, can stoke global inflation and prompt central banks to keep interest rates higher for longer. That could eventually weigh on economic growth and corporate profits. The OPEC+ decision to hold output steady may also limit further upside in oil prices, which could temper some of the enthusiasm in energy-linked stocks.
Looking ahead, market participants will be watching for any changes in OPEC+ policy, as well as upcoming economic data from major economies like the US and China. The Fed minutes are also on the radar, as they could offer clues about the path of US interest rates.
For now, the UAE market appears to be in a sweet spot: strong non-oil growth, supportive oil prices, and a stable policy environment. But as always, investors should stay diversified and keep an eye on global developments that could shift the outlook.
