Aug 1 (Reuters) - Gulf stocks dropped on Thursday after the U.S. Federal Reserve cut interest rates by 25 basis points but, significantly, signalled the move may not mark the beginning of a long easing cycle.
Markets had been looking for the Fed to signal that more cuts were coming.
Central banks in Saudi Arabia, the United Arab Emirates and Qatar followed the move, cutting their rates by the same margin. Their currencies are pegged to the U.S. dollar and they follow the Fed on interest rate moves.
Banking shares were hard hit as the rate cuts are expected to take a toll on their margins.
Saudi’s index was down 0.8% with Samba Financial Group slumping 4% after it became the first lender to report a profit fall for the second quarter.
Al Rajhi Bank and National Commercial Bank , which both earlier gained on robust earnings for the same period, decreased 1.2% and 1.3% respectively. Analysts expect rate cuts to hurt the margins of Saudi banks, which made record profits of around 50 billion riyals ($13.3 bln) in 2018 following several interest hikes over the past few years.
In Abu Dhabi, the index dropped 1.5%, dragged lower by the market heavyweight lender First Abu Dhabi Bank, which was down 2%.
Qatar’s index fell 0.9% with the Gulf’s biggest lender Qatar National Bank shedding 1% and Qatar Islamic Bank losing 1.8%.
Dubai’s index was also down 1% with Dubai Islamic Bank slipping 0.6%.
But here it was property shares that dragged the index the most. Blue-chip developer Emaar Properties traded 1.6% lower after surging in past sessions following a large deal in China. (Reporting by Shakeel Ahmad in Bengaluru; Editing by Hugh Lawson)