Analysts blame the drops on fears of an economic downturn in the United States, a key ally and trade partner with Gulf Arab countries. It's the first financial pinch this region has felt for some time. With rapid growth fueled by billions of incoming dollars from record oil prices, regional economies were riding high until this week.
The interest rate cut by the US Federal Reserve creates immediate pressure on Gulf economies to mirror the move. Almost all Gulf currencies -- including heavy oil producers Saudi Arabia, Oman, Qatar, and the United Arab Emirates -- have pegged their currencies to the US dollar. That means following the Fed, despite the fact the opposite move, namely, raising interest rates, is what's needed to cool the inflation risks of their white-hot economies. Inflation is well over 10% in some Gulf Arab countries.
Just a month ago, a federal interest rate cut in the United States might have been considered good news for Kenya, a country that enjoyed a favorable credit rating, or bad news, because signs of a U.S. recession would mean less tourism and fewer trade dollars coming into the country. Now, according to Kenyan economists, Tuesday's news will mean little to nothing for the country's economy.
The violence and unrest that has followed Kenya's presidential election last month has left one of the most stable economies in Africa on the border of ruins, says economist Robert Shaw.
Shaw says a rate cut in the United States isn't going to make much of a difference.
"It's not very relevant, because what's going on here at the moment is largely domestic. Outside people are … demanding higher premiums, regardless of what's happening in the U.S.," he said.
"There will be some African countries that will benefit, but the risk factor for Kenya is going up, not down. It's irrelevant to Kenya how much the U.S. reduces the benchmark."
Rio de Janeiro, Brazil
The U.S. rate cuts may have only given a brief boost to stocks, but in Brazil, the discovery of a huge gas field has given an extra lift to the energies market. Buoyed by the announcement, shares of the Brazilian state-run energy giant, Petrobras, were given a lift, provoked by the potential of the gas field, which is said to be "huge."
Brazil currently relies on getting most of its natural gas from Bolivia. Analysts, however, were quick to point out that the exact dimensions of the discovery were as yet unknown, but this announcement has gone some way to allay any fears of a possible energy crisis in Brazil, which has been the source of much contention for the Brazilian government. In recent days, the government was forced to make a statement denying the possibility of energy shortages caused by droughts and affecting the country's hydroelectric power stations.
While this discovery has had a positive impact on the Bovespa, the Sao Paulo stock exchange, there are still other sources of concern. Brazil is a major exporter of goods to the United States. Although in recent years there has been a slight reduction in exports to the United States, it is still a major supplier of car parts to its northern trade partner. If a recession were to hit the United States, then the industries involved in manufacturing these car parts would be affected, as would, in turn, the country's steel industry.