Saturday, January 04,
2020 / 04:50PM / By ARM Research /Header Image Credit: ARM
Brent oil prices spiked in today's trading to touch a peak of $69.35 before pulling back slightly to $68.8 (+3.8%), at the time of writing. This came on the back of heightened tensions between the US and Iraq which escalated after the US killed a top Iranian commander early this morning. The US drone strike was labelled by the Iranian government as an act of 'international terrorism' and promised a 'forceful revenge'. This was a retaliation to an Iranian-backed militia attack on the US embassy in Baghdad. Further attacks, from either side, could lead oil prices even higher and make it harder for a quick resolution to be reached. Meanwhile, revised manufacturing PMI readings for both the EU and US eased slightly in December to 46.3 and 52.4 from previous month of 46.9 and 52.6, respectively. In the former, the deterioration stemmed from weaknesses in Germany, Italy and the Netherlands. Meanwhile, the slowed expansion in the US came as output growth slowed and subdued business confidence led to a pull-back in hiring.
Akin to the trend observed in prior months, PMI which shows the level of business activities, revealed that Nigeria's economy expanded at a faster pace in December 2019 relative to the pri-or month. Precisely, both manufacturing and non-manufacturing sectors grew 60.8 and 62.1 index points respectively following increases across all sub-indices. Meanwhile, the business expectation survey showed improved confidence in the overall economy at 30.3 index points (November: 29.0 index pts), painting a positive picture for the economy in the near term.
Over 2019, the NSE ASI lost 14.6% YoY following declines across all sectors save for the food (+1.17%) and Insurance (+2.59%) sectors. In sectoral terms, the top three losers were Cement (-24.08%), Breweries (-38.65%), Banks (12.54%) and Personal care (-45.00%). Notably, DANGCEM, NB, GUARANTY and UNILEVER lost 25.14%, 30.99%, 13.79% and 40.54% YoY respectively in 2019. Meanwhile, the Nigerian bourse began the year on a positive note, as it gained 2.09% WoW to close at 26,968.79 pts, while market capitalization advanced N266.6 bil-lion. Positive returns in the Banking (+3.39%), Cement (+1.32%), Telecom (+2.53%), Food (+2.40%), Oil & Gas (+15.04%) and insurance (+4.45%) sectors outweighed losses in the Brewers (-2.65%) and Personal care (-3.85%) segments. Dissecting the sectoral performance revealed gains in ACCESS (+2.01%), GUARANTY (+3.79%), UBA (+4.17%), ZENITH (+4.62%), DANGCEM (+1.43%), MTNN (+3.81%) and NESTLE (+2.79%). In other news, the recapitalization deadline for insurance companies earlier slated for June 30th, 2020 was extended to 31st of December 2020 by NAICOM.
Over 2019, average fixed income yields printed 741bps lower YoY to 7.72%. This comprises a jaw-dropping 1015bps fall in NTB yields to 4.85%, while bond yields closed the year 468bps lower at 10.59%. Turning our focus to this week, average fixed income yields maintained a downward trend, dropping 60bps WoW to 7.55%. At the short end, yields dropped by 102bps to 10.15% mirroring the performance at the primary auction where the average stop rate dropped 29bps to 4.53%. At the auction, the FG rolled over the N74.84 billion which matured. On the other hand, bond yields fell 18bps to 10.52% driven by the mid-tenor bonds: Mar-2025 (-61bps), Jan-2026 (-54bps) and Mar-2027 (-57bps).
Take-Away For The Week
What will the next decade bring?
The below shows how the NSE has performed in the most recent decade. Only 4 of the last 10 years have seen positive market returns. What will 2020 bring?
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Nigeria: Economic Dashboard @ 030120
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