• Global stock markets tumbled after a surprise move by U.S. President Donald Trump, who announced new tariffs on imports, sparking fresh fears of a trade war. Countries like China responded with their import duties, intensifying global tensions. Investors now worry that escalating trade barriers could hurt global growth, profits, and jobs. Stock markets across Asia, Europe, and U.S. futures have all dropped sharply, as fear and uncertainty dominate company fundamentals. Markets are now waiting, hoping for signs of de-escalation from world leaders.

The local stock market is also in the same direction.

• The Pakistan Stock Exchange (PSX) has recently faced significant volatility, primarily influenced by escalating global trade tensions and domestic economic factors. The benchmark KSE-100 Index plummeted over 5%, triggering a temporary halt in trading. This sharp decline largely resulted from the U.S. government’s new import tariffs, which unsettled global markets and prompted widespread investor concern.
• The imposition of these tariffs has raised fears of a global trade war, adversely affecting investor sentiment worldwide. Pakistan, facing a steep 29% tariff on its exports to the U.S., is particularly vulnerable. In response, the Pakistani government announced plans to send a delegation to Washington to negotiate relief from these tariffs.
• Domestically, the PSX has also been influenced by political developments. Major leaders of the main ruling parties will leave abroad during the current week.

Falling Global Commodity Prices and Pakistan’s Economic Outlook

• A sharp drop in global commodity prices—especially oil—has created a favorable window for Pakistan’s economy. Brent and WTI crude prices have hit their lowest since April 2021, easing external pressures for oil-importing countries like Pakistan.
• The decline helps reduce the import bill, stabilize the rupee, and ease inflation. This creates room for potential interest rate cuts by the State Bank, which could stimulate borrowing and economic growth.
• The Pakistan Stock Exchange would respond positively. Sectors like Chemicals, Cement, Textiles, Autos, and Fertilizers tend to benefit directly from lower transportation and other oil-related input costs, making their profit margins more attractive. However, not all sectors win. Oil and gas exploration companies such as POL, OGDC, and PPL may see their revenues and profitability decline, as their earnings are directly tied to global oil prices. This can weigh on the energy-heavy KSE-100 index in the short run, even if broader market sentiment improves.

Courtesy – AHCML Research