Gulf markets are expected to fall on Sunday, tracking Saudi Arabia which plunged to a five-month low on Saturday, in the first signs of pressure on world markets after S&P downgraded the US credit rating.    

Saudi shares ended 5.5 percent lower on Saturday, led by  petrochemical and banking shares, with the market suffering its biggest daily decline since the height of the regional political unrest.      

Petrochemical giant Saudi Basic Industries Corp (Sabic)  fell 5.8 percent and heavyweight Al-Rajhi Bank  dropped 5.2 percent.

"The Saudi market is strong ... but it is correlated to US
debt and debt in Europe and how it is handled," says Saudi economist Abdulwahab Abu Dahesh.     

The US dollar is expected to weaken and Treasury yields rise when Asian markets reopen on Monday, though any selling in response to ratings agency S&P's downgrade of the US is likely to be tempered by the escalating crisis in the euro zone.      

"People are now more concerned whether the US goes into a double dip - these are not new developments but just catching more attention, which you can blame the downgrade for," says Ibrahim Masood, senior investment officer at Mashreq bank.

"Sentiment will drive down commodity prices."     

Property stocks will also be watched as Abu Dhbai's biggest developer Aldar Properties posted profit of Dh127.3 million and Dubai contractor Arabtec's profits fell 73 percent compared to the same period last year. - Reuters