Weekly Economic and Financial Commentary – WE 01 Feb, 2019

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Saturday, February 02, 2019    10:30 AM / By ARM Research 

 

Global Economy 

Growth in the Euro area decelerated 40bps in Q4 18 to 1.2%, compared to 1.6% in Q3 18. We note that the weakness emanated from Germany (whose data was unavailable at the time of writing) which accounts for 22% of EU’s GDP and Italy – which entered recession with the GDP contracting 0.2% QoQ, both of which outweighed stagnant growth in France (0.3% QoQ), and moderate expansion in Spain (0.7% QoQ). In US, the 35-day partial government shutdown took a toll on the economy in January with unemployment rate settling at 4.0% (vs. 3.9% in December). The increase emanated from the 380,000 workers which were furloughed during the shutdown and classified as temporarily unemployed. Elsewhere, Manufacturing PMI data for January released by IHS Markit revealed US PMI came in higher at 54.9 (from 53.8), while UK and Japan PMI moderated to 52.8 and 50.3 (from 53.5 and 52.6 respectively). Meanwhile, in China, the PMI further hit a low level at 48.3 from 49.7.


Domestic Economy

Activities in the manufacturing and non-manufacturing sector remained robust in January, according to recent PMI update by the Central Bank of Nigeria. Activities in both sectors grew by 58.5 pts and 60.1 pts respectively, albeit at a slower pace when compared prior month of 61.1 pts and 62.3 pts respectively. Elsewhere on the Nigerian bourse, updated data for December 2018 revealed that the equities market recorded foreign portfolio net outflow of N66 billion over 2018 compared to a net inflow of N337 billion in 2017 following a 48% YoY increase in outflows during the year compared to 25% YoY decline in inflows. Notwithstanding the moderation in flows, foreign investors still dominated transactions in the equities market, accounting for 51% (2017: 47%) of total value traded.


Equities

The Nigerian equity market closed the week negative, with the NSE ASI shedding 2.51% WoW to close at 30,636.36 points. The bearish performance was driven by losses in the most sectors - Banking (-2.66%), Brewers (-6.43%), Cement  (-2.07%), Construction (-4.48%), Food (-2.25%) and Insurance (-0.74%). Further breakdown of the performance reveals that sell pressure prevailed across bellwether stocks (ACCESS: -6.15%, FBNH: -3.92%, UBA: -7.14%, GUINNESS: -8.45%, NB: -7.38%, DANGCEM: -2.06%, SEPLAT: -1.85% and MANSARD: -0.51%).


Fixed Income

Yields in the Nigeria fixed income market contracted 26bps WoW to 14.73% following buy sentiment at both ends of the curve.  To be specific, despite series of OMO issuances (N525 billion) by the CBN, the system remained broadly liquid (+30% WoW) due to the combination of FAAC inflows (N229.2 billion), OMO maturities (N192 billion) and retail FX refunds. As a result, average NTB yields dipped 18bps WoW to 14.58%. Meanwhile at the long end of the curve, amidst bargain hunting on longer tenured bonds and lower stop rates at this week’s bond auction (Average stop rate:  -15bps MoM to 15.27%) average bond yields compressed 34bps to14.88%.


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Take-Away For The Week

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Nigeria: Economic Dashboard @ 010219

 

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