Weekly Economic and Financial Commentary - Week Ended Sept 27, 2019


Saturday, September 28, 2019 / 08:20AM / By ARM Research 


Global Economy

Preliminary German manufacturing PMI for September printed at 41.4 (August: 43.5) vis a vis analyst expectation of 44.0 -- marking its lowest level in 123-months. This, together with contraction in France (49.7 vs 50.7 in August) as well as slower growth in the rest of the euro area weighed on the Eurozone's manufacturing PMI which sunk to an 81-month low of 45.6 (August: 47.0). This largely reflects impact of the lingering global trade tensions which has weighed on the growth of output and new orders. On the flip side, the US' manufacturing PMI for the month of September expanded to 51 pts from 50.3 pts in the prior month (analysts' expectations of 50.3) as output and new orders improved despite weakening export orders. Still in the US, advance trade balance data for the month of August showed trade deficit increased slightly to $72.8 billion from $72.5 billion in July. This was driven by a faster increase in Imports (+$0.5 billion to $210 billion) than exports (+$0.2 billion to $138 billion). 


Domestic Economy 

CBN's Purchasing Managers' Index (PMI) for the month of September, revealed continuous expansion, albeit at a slower rate relative to the prior month. For context, Manufacturing PMI printed at 57.7 index points (August: 57.9 index points) hinged on slower growth in raw materials, production level and employment level. Similarly, non-manufacturing PMI also expanded at a slower rate as September reading came in at 58.0 index points relative to 58.8 index points in August. This was largely by slowing new orders and inventories relative to the prior month. 



This week, Nigeria's equity market closed on a negative note, with the NSEASI losing 9bps to 27,674.04 pts with market capitalization shedding N11.5 billion. This was largely driven by losses across major sectors  such as Banking (-3.25%), Brewers (-0.56%), Cement (-2.55%), Personal Care (-0.22%) and Real estate (-0.74%), which outweighed gains in Oil & Gas (+36.45%%), Food (7.57%) and Insurance (+1.92%) sectors. Furthermore, major losses were seen in GUARANTY (-4.83%), STANBIC (-11.32%), ZENITH (-1.07%), GUINNESS (-8.11%), DANGCEM (2.77%) and PZ (-0.71%), outweighing gains in SEPLAT (+21%) and NESTLE (11.15%). Nonetheless, on a monthly basis, Nigeria's equity has taken a new turn in the month of September, advancing +0.54%, contrary to a 0.69% contraction in the prior month. On a sectoral basis, the Banking, Brewers, Food, Personal care, Oil & Gas and insurance sectors fueled the gains, muting declines across the Cement and Telecoms sector.


Fixed Income

Fortunes reversed this week in the fixed income market as average yields shed 14bps WoW to 13.78%. This was spearheaded by the short end of the curve which declined by 33bps WoW to 13.29% as bills across all tenors experienced higher demand - short (-17bps); mid (-39bps); long (-30bps). Average yields in the bond market increased slightly by 5bps WoW to 14.26%, driven by upticks in the Apr-2037 (+20 bps), Mar-2027 (+19bps) and Jan-2022 (+11bps) bonds. Elsewhere, at this month's FGN Bond auction, amidst tight demand (Bid to cover: 1.07x). FG sold N146.61 billion worth of long dated bonds at an average stop rates of 14.49%. Meanwhile, despite offering to sell N250bn worth of OMO bills, the apex bank sold  N302.42 billion. The average stop rate here settled at 12.29%, 1bp lower than the last auction.


Take-Away For The Week

Emerging and Frontier Markets benchmark interest rates movements

This week, we feature interest rate movements among major Emerging and Frontier markets this year. This shows the widespread accommodative monetary policy stance adopted by most Central Banks amid slowing growth concerns.


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

Nigeria: Economic Dashboard @ 270919  

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