Egypt's bourse rallied for a fourth day on Thursday since Mohamed Mursi's presidential election victory, while most Gulf markets fell with investors cutting risk ahead of an EU meeting.
Egypt's main index rose 1.7 per cent, staging its fourth-biggest one-day gain of its 14 year history.
For now the fact that the generals accept the prospect of a government led by Mursi, whose Muslim Brotherhood they tried for decades to thwart, has raised hopes for more decisive leadership after months of policy paralysis.
The index has leapt 16 percent this week but traders say investor appetite endures, with buyers appearing each time the market begins to dip.
'Appetite is still quite strong, based on the euphoria of earlier in the week... There is an existing momentum and every time the market relaxes you find a buyer,' said Mohamed Radwan of Pharos Securities.
EFG Hermes and Orascom Telecom Media and Technology were among the most heavily traded stocks, gaining 1.7 percent and 2.1 percent respectively.
In the Gulf markets, most bourses tracked losses on European shares as divisions among EU leaders dashed hopes of concrete measures to tackle the region's debt crisis.
Germany's Chancellor Angela Merkel has brushed aside demands from Italy and Spain for rapid action to lower their soaring borrowing costs, and poured cold water on proposals backed by France for euro zone countries should assume joint liability for each other's debts.
'Overall the picture is still not that positive. At this point in time, U.S. numbers are important as people monitor the economic recovery but more importantly, Europe is the issue,' said Ali Adou, portfolio manager at The National Investor.
'We don't know how things will go ... but risk is high and investors are cautious, especially in our region.
Abu Dhabi's index dropped 0.9 percent to two-week closing low. Telecoms operator Etisalat was the main drag, falling 3.3 percent.
Dubai's index eased 0.02 percent, its sixth straight decline. Emaar Properties shed 1.1 percent.
Oil prices also extended losses, adding to negative investor sentiment in the world's top crude exporting region.
Second-quarter earnings season will start next week, but these will likely have little impact on stocks, with investors instead taking their cue from global markets during the summer lull.
'There might be some catalyst from earnings, but I don't expect much of a move until Ramadan, unless we have some positive developments in Europe,' Adou added.
The Muslim month of fasting, Ramadan, is expected to start in late July.
Elsewhere, Qatar's benchmark slumped to a 10-month low, closing 0.5 percent lower.
Heavyweight Industries Qatar shed 1.2 percent, while Qatar Telecom fell 3.3 percent to its lowest finish since late February.
The operator offered on Tuesday to buy the 47.5 percent stake in Kuwait's Wataniya that it does not already own. Wataniya's shares have been suspended.
In Kuwait, the index ended 0.6 percent lower at its lowest close since Jan. 23 amid a slow-burn political crisis.
Investors are waiting for a new cabinet and the recalling of the parliament. A court ruling last week dissolved a parliament dominated by opposition Islamists and reinstated the previous, more government-friendly, assembly.
'The market is embedded in political instability more than the rest of the region,' said Fouad Darwish, head of brokerage at Global Investment House. 'We need some confidence to return,' he added.
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