Weekly Economic and Financial Commentary - April 01 - 05, 2019

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Saturday, April 06, 2019   / 09: 37aM / By ARM Research  

 

Global Economy

 

In the Euro Area, preliminary estimates by Eurostat revealed a moderation in inflation rate for the month of March to 1.4% YoY from1.5% YoY recorded in the prior month, short of ECB’s 2% inflation target. Clearly, reduced energy prices, non-energy industrial goods, alcohol & tobacco and food prices drove the downward movement, leaving ECB in a conundrum of curbing choosing between pushing headline inflation towards its target or easing to bolster economic growth.

 

Meanwhile, a series of manufacturing PMI data were released by IHS Markit for March which showed that US PMI recorded its weakest expansion since June 2017, printing at 52.4 index pts (down from 53 index pts in the previous month), while that of Euro area and japan further contracted to 47.5 and 49.2 respectively.

 

On the flip side, China recorded its first expansion in four months, with the manufacturing PMI increasing to 50.5 from 49.2, while UK surged to a 13-month high of 55.1 (from revised 52.1 in February) bolstered by Brexit preparations, which led to a record increases in inventories.

 

Domestic Economy

 

This week, the DMO released Nigeria’s public debt data for full year of 2018 which showed an increase in total public debt by 12.5% YoY to N24.39 trillion ($79.44 billion). While domes-tic debt stock accounted for 68.18% (vs 73.36% in the prev. year) of Nigeria’s total debt stock, foreign debt stock accounted for 31.82% (vs 26.64% in the prior year).

 

This showed that FG took feeble steps in attaining its optimal debt portfolio mix of 60:40 for domestic and external debt by end-December 2019. Accordingly, borrowing rates in domestic market dropped from 18% in 2017 to a range of 14 – 15% in 2018.

 

For the fourth consecutive week the Nigerian equities market continued its decline with the ASI shedding 4.59% this week to close at 29,616.38 points while market capitalization lost N548 billion. This lackluster performance in Nigeria’s bourse was driven by bearish sentiments across all sectors with Banking (-5.49%), Breweries (-8.67%), Cement (-1.30%),

 

Personal Care (-8.37%), Food (-6.94%), Insurance (-1.43%) and Oil & Gas (-4.99%) all closing in the red. Dissecting the sectoral performance revealed marked sell-offs across bell whether stocks (ACCESS: -11.63%, FBNH: -10.37%, NB: -10.11%, UBA: -19.48%, ZENITH: - 6.65%, INTBREW: -9.62%, NESTLE: -8.23%, DANGFLOUR: -16.18%, and DANGCEM: -1.05%).

 

Fixed Income

 

Contrary to last week, average fixed income yields expanded 31bps WoW to 13.9% largely driven by elevation at both ends of the curve. At the short end, CBN resumed its liquidity strain with N526 billion worth of OMO sale.

 

This alongside higher stop rates at this week’s NTB auction resulted in 40bps WoW jump in average secondary market NTB to 13.54%. Similarly, average bond yields expanded 14bps WoW to 14.25% on the back of sell off at the long end of the curve.

 

Elsewhere, DMO published FGN bond calendar for the second quarter 2019. Over the Q2 2019, FG plans to borrow N300 billion which is 23% and 25% lower than actual and planned borrowings for Q1 2019. In addition, the calendar saw the introduction of two new issues — FGN APR 2029 (10-year) and FGN APR 2049 (30-year).

 

 

Chart Of The Week

 

Nigerian Equity Market Downturn: Inspite of the calm outcome of the general elections, for the fourth consecutive quarter, Nigeria Equity market ended Q1 2019 on a bearish note (-1.2%).

 

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Source: NSE, ARM Research

 

 

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