Weekly Economic and Financial Commentary – WE 05th Oct, 2018

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Saturday, October 06, 2018  15.45PM  / ARM Research

 

Global Economy

US trade deficit widened by 6.4% to $53.2 billion in August, the highest in 6 months, as exports of goods and services dropped by $1.7 billion MoM to $209.4 while imports rose by $1.5 billion MoM to $262.7 billion. On job creation, US unemployment rate fell to a 50-year low of 3.7% in September (August: 3.9%) while wage growth rose at a steady pace of 2.8% (August: 2.9%), suggesting moderate inflation pressures.

 

Elsewhere, against market expectation, the Reserve Bank of India (RBI) kept its interest rates unchanged (repo and reverse repo at 6.5% and 6.25% respectively) as the recent slowdown in inflation overshadows the strong economic growth, forcing the committee sought to wait for better clarity on the rising growth-inflation scenario in the economy.

 

In another front, global crude oil price rallied to almost a 4-year high crossing $85/bbl. largely due to geopolitical concerns. Importantly, there was heightened fear of a supply crunch as timeline (November 4) for US sanctions due to hit Iran drew closer To add, production shortfalls in Venezuela further supported the rally in crude oil price pressures.

 

Domestic Economy

Recent data by the CBN showed economic activities in the country continued to expand in September, but at a slower pace relative to the previous month. The Manufacturing Purchasing Manager’s Index (PMI) grew to 56.2 pts in September (August: 57.1 pts) reflecting slower growth in new orders and raw materials. Similarly, non-manufacturing PMI expanded to 56.5 pts, albeit at a slower pace relative to 58.0 pts in August.

 

The slow growth mirrored slow pace of expansion in business activities, level of new orders, level of unemployment and Inventories. Further, business expectation survey report for the month of September signals respondent firms are more optimistic on the economy compared to the preceding month with general expectation of currency appreciation, declining inflation rate and uptick in borrowing rates for both September and October.

 

Equities

The Nigerian equity market declined by 1.17% WoW to close at 32,383.15 index points. The bearish sentiment was largely driven by persisting sell pressure in bellwether stocks – DANGCEM (-2.44%), STANBIC (-7.6%), UBA (-2.38%), NB (-1.97%), and ETI (-2.23%). Analysis of the market performance on a sectorial basis showed that Cement (-2.21%), Brewers (-1.55), Banking (-1.44%), Real Estate (-0.53%) and Insurance (-0.47%) closed the week negative while the Oil & Gas (+2.23%), Food (+0.5%), and Personal Care (+0.03%) sectors closed positive over the week.

 

Fixed Income

Yields in the Nigerian Fixed Income market moderated over the week as average yields dipped 24bps WoW to 14.21% following downward trend at both ends of the curve. The performance was largely driven by strong buy pressure following the relatively buoyant liquidity in the system with ₦173 billion of OMO maturing over the week. For emphasis, at this week T-Bill auction, average bid to cover climbed to 3.3x, the highest so far this year. Consequently, average T-Bill yield saw a drop of 31bps WoW to 13.63%. Similarly, following buy sentiment, average bond yields also dipped 17bps WoW to 14.79%. 

 

 

Notes: Tax revenue continues to fall short of budgeted revenue

 

Proshare Nigeria Pvt. Ltd.

Source: FIRS, ARM Research / *9M 2018

  

 

 Proshare Nigeria Pvt. Ltd.

 

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

  

Footnotes                                                                                      

1.       Weekly Economic and Financial Commentary – WE 21st Sept, 2018

2.      Weekly Economic and Financial Commentary – WE 07th Sept, 2018 

3.      Weekly Economic and Financial Commentary – WE 31st August, 2018

4.      Weekly Economic and Financial Commentary – WE 24th August, 2018

5.      Weekly Economic and Financial Commentary – WE 17th August, 2018

6.      Weekly Economic and Financial Commentary – WE 10th August, 2018

7.      Weekly Economic and Financial Commentary – WE 03rd August, 2018

8.     Weekly Economic and Financial Commentary – WE 13th July 2018

9.      Weekly Economic and Financial Commentary – WE 14th June 2018

10.  Weekly Economic and Financial Commentary – WE 20th July, 2018 

 

 Proshare Nigeria Pvt. Ltd.


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