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DUBAI, Dec 14 (Reuters) - Stock markets in the Gulf may have a firm tone on Wednesday, recovering from some of Tuesday's losses, but major gains look unlikely before the U.S. interest rate hike and guidance from the U.S. central bank expected late in the day.
MSCI's broadest index of Asia-Pacific shares outside Japan is up 0.1 percent and Wall Street closed sebstantially higher, but Brent oil has fallen back to to $55.03 a barrel - it has now dropped roughly 5 percent since hitting an 18-month peak on Monday.
Dubai's index, which fell back 0.9 percent on Tuesday, still closed 1 point above technical resistance on its August peak of 3,624 points. Healthy volumes over the last week suggest that foreign investors remain interested in the market.
"In the weeks leading up to the OPEC deal, activity was mainly coming from the retail traders - now we are seeing more institutional and foreign buying. This will help support the market in the near term," said a Dubai-based broker.
But Saudi Arabia's index, which has enjoyed an almost 30 percent surge over the last two months, has stalled near a one-year high hit earlier this week as investors brace for the 2017 state budget announcement, expected late this month.
Many bankers and analyst believe the 2016 deficit is likely to have shrunk much more than originally projected, and this plus higher oil prices should give the government room to spend a little more on economic development projects next year.
But consumer spending may continue to be weak going in to the new year as more domestic fuel subsidy cuts look likely in the 2017 budget. Domestic-focused shares were some of the main laggards on Tuesday, a trend which may spill over to Wednesday's session. (Reporting by Celine Aswad; Editing by Andrew Torchia)