September 1, 2018 12.01PM / ARM Research
In the United States, the federal reserve’s preferred price index – Personal Consumption Expenditures (PCE) – rose 2.3% YoY in July (vs. 2.2% YoY in June), its fastest pace in six years, pushed by higher consumer spending and rising energy costs. Also, core PCE, which is the Fed's preferred inflation measure increased a tick higher to 2%, up from June's read-ing of 1.9%. Elsewhere, Canada’s current account deficit narrowed $1.6 billion to $15.9 billion in the second quarter from a revised $17.5 billion deficit in the first quarter on lower deficit on trade in goods which more than offset higher deficits on trade in services and investment income. Over in China, manufacturing purchasing managers index (PMI) edged up slightly to 51.3 in August from 51.2 in July, driven by a pick-up in production levels.
According to data released by the National Bureau of Statistics, Nigeria’s economy expanded 1.5% YoY in Q2 18 (vs. 1.95% growth in Q1 18). Contrary to the trend of an oil led growth since the economy exited recession in Q2 17, the non-oil sector was the major driver for growth this quarter. Precisely, the non-oil sector grew by 2.05% (vs. 0.8% in Q1 18) while the oil sector contracted by -3.95% (vs. growth of 14.8% in Q1 18).
During the week, President Buhari declined assent of the historic Petroleum Industry Governance Bill (PIGB) as passed by the National Assembly. As stated by the Presidency, the decision not to sign the bill was based on some controversial dictates in the bill, which includes (1) provision for a 10% holding of generated revenue by the Petroleum Regulatory Commission at the detriment of Nigeria’s fiscal finance, (2) ambiguity and conflict in interpretation of some legislative drafting, and (3) the provision for the expansion of the scope of the Petroleum equalization fund and some provisions which diverge from the administration’s policy.
The Nigerian equities market ended the week negative with the NSE ASI declining 1.63% WoW to close at 34,848.45pts. The turn in market activity relative to the prior week (+45bps) was on the back of losses in market bellwether counters – FBNH (-8.81%), ZENITHBANK (-4.33%), GUARANTY (-4%), DANGCEM (-2.98%) and NB (-2.1%). Analysis of the performance on a sectorial basis shows that Banking (-2.52%), Brewers (-0.87%), Cement (-3.19%), Insurance (-0.26%) and Personal Care (-1.62%) sectors closed negative whilst the Food (+1.11%) and Oil & Gas (+1.84%) sectors closed positive.
Average yields in the Nigeria fixed income market expanded 22bps WoW to 13.82% following uptrend at both ends of the curve. At the short end of the curve, despite pent up liquidi-ty in the system – in the absence of an OMO sale this week –, investors sold off T’bills following higher stop rates at this week’s NTB auction (91 Day: 11%, 182 Day: 12.3%, and 364 Day: 13.05%). Consequently, T’bills yields rose 16bps WoW to 12.85%. On the other hand, the sell-off at the long end of the curve continued as bond yields jumped 29bps WoW to 14.79%.
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