Weekly Economic and Financial Commentary – WE 28th June, 2019

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Saturday, June 29, 2019  / 07:00AM / By ARM Research 

 

Global Economy

Recent data from the US shows that the core PCE index, which is the Fed’s preferred inflation measure, kept steady over May (+1.6% YoY), giving the Fed ample room for interest rate cuts this year as it deliberates on how best to respond to slowing growth momentum. Also, according to preliminary reports, the EU’s annual inflation rate in June printed at 1.2%, unchanged from the previous month. Elsewhere, the Canadian economy expanded by 0.3% MoM in the Month of May following a 0.5% MoM expansion in April which marks the strongest two-month increase since the end of 2017.  Growth over the month was particularly driven by increased oil output (+5.5% MoM).

  

Domestic Economy 

The Purchasing Managers’ index survey for the month of June showed continued expansion (albeit slower when compared to the prior month). The manufacturing PMI printed at 57.4 index points (May: 57.8 index points) hinged on slower growth in new orders and raw materials inventory. Also non-manufacturing PMI printed at 58.6 index ppts (prior month: 58.9 index ppts) as business activity, employment and inventory level slowed during the month. Elsewhere, NBS released the terms of trade data for Q1 2019 which showed the terms of trade index increased by 2.3% over the quarter, reflecting the increase in export index (+1.85%) as well as decline in import index (-0.46%). Pointedly, the improvement was driven by increased trade in animal products, wood as well as chemical and allied products.  

 

Equities

The Nigerian Bourse bucked its negative streak this week, with the ASI gaining 0.39% WoW to close at 29,966.87 points and market capitalization gaining N50.9 billion. The bullish sentiment was spurred by gains in Brewers (+5.53%), Personal care (+5.75%), Oil& Gas (+3.07%) and Construction (+2.67%) sectors, muting losses in the Insurance (-0.95%), Banking (-0.36%) and Real Estate segments (-0.03%). Examining the market performance reveals gains across stocks such as UACN: +9.92%, INTBREW: +9.58%, GLAXOSMITH: +9.09%, GUARANTY: +5.28%, NB: +5.00% and PRESCO: +4.00%.

 

Fixed Income

This week, average fixed income yields dipped 27bps WoW to 13.12% following depression at both ends of the curve. At the short end of the curve, average yield declined by 21bps WoW to 12.27% following contraction in the 365-DTM bill which shed 80bps over the course of the week. Similarly, average secondary market bond yields fell 33bps WoW to 13.97% – its lowest level since the end of May – with most securities closing lower this week –JUL 21 (-74bps to 13.78%) and MAR 25 (down 69bps to 13.98%) bonds posting the most contractions. This is in contrast to this month’s auction that held this week where DMO sold N96bn of the N113bn on offer at higher closing rate of 14.5% (vs 14.28% in May).  

 

Take-Away For The Week

Nigeria’s Terms of trade 

 

This week, we feature Nigeria’s Q1 19 trade balance with the top five merchandise trade partners.

 

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Research 234 (1) 2701653  research@armsecurities.com.ng

 

Nigeria: Economic Dashboard @ 280619 

 

Proshare Nigeria Pvt. Ltd.

 

Proshare Nigeria Pvt. Ltd.


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