Pakistan stocks reach unprecedented high on interest rate cut optimism

Pakistan stocks reached an unprecedented high on Monday, driven by investor optimism ahead of the forthcoming Monetary Policy Committee (MPC) meeting.

Anticipation of a substantial rate cut has fueled the rally, with market participants eagerly awaiting the committee's decision.

Market dynamics were significantly influenced by a sustained liquidity shift away from asset classes, spurred by the recent drop in secondary market yields. This liquidity movement has been a pivotal force behind today's market surge.

Leading the charge were oil and gas exploration companies, fertilizer firms, and oil and gas marketing entities, which collectively boosted the index by an impressive 1,814 points. Their substantial contributions underscored the sector-specific drivers propelling the market to new heights.

The KSE-100 index gained 1,867.61 points or 1.63% to close at 116,169.41 points.

India's main stock indexes dropped on Monday. IT company stocks fell because of uncertainty about future U.S. interest rates, even though a rate cut is expected this week. Metal stocks also declined due to disappointing economic data from China, the biggest consumer.

Everyone is now waiting for the Federal Reserve's decision on interest rates on Wednesday. A 0.25% rate cut is likely, and people will be paying close attention to what they say about rate cuts in 2025.

BSE-100 index shed 76.95 points or 0.29% to close at 26,197.34 points.

DFM General index gained 217.91 points or 4.51% to close at 5,047.54 points.

Commodities

Oil prices have dropped after going up recently. Prices went up because people expected less oil due to new US sanctions on Russia and Iran, major oil producers.

US Treasury Secretary Janet Yellen talked about possible sanctions on tankers and Chinese banks to cut Russia's oil earnings.

China's plans to boost its economy might increase oil demand. The mood in the market got better after interest rate cuts by central banks in Canada, Europe, and Switzerland. Now, traders are looking at the expected 0.25% interest rate cut by the US Federal Reserve, which could help the economy and increase oil demand.

Brent crude prices lost 0.9% to $73.82 per barrel.

Gold prices increased on Monday. This is largely due to expectations of a less dovish Federal Reserve. Investors appear to be increasingly convinced that the Fed will take a more cautious approach to rate cuts next year, as progress in reducing inflation towards the 2% target seems to have stalled.

As a result, this has supported higher US Treasury bond yields, which is acting as a headwind for the non-yielding gold.

International gold prices surged 0.42% reaching $2,660.34 per ounce.

Currency

US dollar steadied against PKR in the inter-bank market, up 0.03%. Pakistani currency settled at 278.17 with a loss of 6 paisas. In the open market USD was trading at PKR 279.