Markets cautious; focus on global economy

Middle East stocks are seen trading sideways on Tuesday, with the focus remaining on global markets ahead of European bank stress test results and U.S. earnings season.Regional quarterly earnings have so far been steady if unspectacular and many analysts foresee little impact on markets.

"We see the markets being volatile and macro driven by data from the U.S., sovereign debt issues in Europe and the move towards a soft landing for China's economy - results are more or less already discounted," says Zahed Chowdhury of Al Mal Capital.Robert McKinnon, ASAS Capital chief investment officer, offers a similar outlook, predicting Saudi Arabia will outperform the region because of its market breadth, higher liquidity and company fundamentals, while UAE markets will be sideways to lower as continued doubts over the dominant banking and property sectors weigh.Samba Financial Group reported a 1.9 per cent fall in second-quarter profit after market hours on Monday, although this beat consensus analysts' forecasts, as lending income and loans shrank 7.8 and 5.7 per cent respectively. Stress test results for 91 European banks will be released on July 23.