"We have underperformed for the past few weeks and tend to be correlated more to the downside for both oil and global markets," said Matthew Wakeman, EFG-Hermes managing director for cash and equity-linked trading.

"It seems local investors are waiting for internationals to come in lead the market up. Developed and emerging markets are doing well, so internationals don't have a shortage of places to put their cash, but with MENA (Middle East and North Africa) underperforming they should return sometime and locals don't want to risk buying too early."

World and emerging equities hit a two-year high as investors anticipated more US monetary easing would support its economy, while oil reached a six-month peak.

In Saudi Arabia, the Tadawul All-Share Index (TASI) fell 0.45 percent to 6,344.02, its first decline for five session. The sector activity for the day was mostly negative with 12 losing sectors against 3 gaining sectors. The losing sectors ranged from 0.02 percent by the Energy & Utilities sector and the Insurance sector to 1.25 percent by the Agriculture & Food Industries sector and the Media and Publishing sector. On the other hand the three gaining sectors were Real Estate Development, Multi-Investment and Industrial Investment with respective gains of 0.01 percent, 0.18 percent and 0.82 percent. The overall market breadth for the day was negative with 37 advancers against 93 decliners giving it an AD ratio of 0.39, the Financial Transaction House (FTH) said in its daily market commentary. The stock market turnover reached SR2.91 billion.

In Abu Dhabi, Emirates Telecommunications Corp. (Etisalat) ended flat, having slipped to a three-week intraday low, as it prepared to start due diligence to buy a controlling stake in Kuwaiti rival Zain.

Etisalat later said the deal was unlikely to be concluded before the end of the first quarter of 2011.

Zain fell 1.4 percent, trimming its gains to 11.1 percent since the sale, brokered by major shareholder Kharafi group, was announced in late September.

Abu Dhabi's index slumped to a two-week low at 2,762 points and Dubai fell for a second day to 1,735 points.

"Q3 earnings are out and we didn't see exceptional results, apart from maybe in Qatar - for Saudi, the UAE and Oman the numbers have mostly come in line or below expectations," said Adel Nasr, United Securities brokerage manager.

"So there's not much motivation to get into the market, although if oil prices go up, our equity markets should continue to do well. Such a move wouldn't be supported by financial results, however, so we'll be vulnerable to any negative sentiment from global markets."

The Kuwaiti index fell 0.2 percent to 7,119 points. The Qatari index rose 0.4 percent to 7,799 points.

The Omani index rose 0.3 percent to 6,500 points. The Bahraini index eased 0.01 percent to 1,460 points.
 
— With input from agencies