Weekly Economic and Financial Commentary – WE 14th June 2018

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Sunday, June 17, 2018  01.48PM / ARM Securities

 

Summary
 

Global Economy

This week, the US central bank (FED) meeting delivered the expected 0.25% increase in its key policy rate, the second move this year, taking the top-end of its tar-get band to 2.0%. This was not a surprise as market had attached a ~90% probability to the rise in interest rates.

 

However, contrary to earlier views, the Fed sig-naled two more rate hikes this year, as decline in unemployment rate in the face of sturdy economic growth signals future upward pressure on Inflation. In Europe, the European Central Bank (ECB), at its policy meeting today, announced its intention to end its Quantitative Easing (QE) program in December and keep its three policy rates at current levels, at least through Q3 2019.

 

The ECB guided to purchase €30 billion worth of bonds monthly through September, reduce to €15 billion monthly from October and cease buying bonds after December, assuming the pace of economic activity and inflation outlook develops in line with its fore-cast. Elsewhere, China’s economy showed sign of slowdown as May industrial production data printed slower than expected at 22-year low of 6.8% YoY (April: 7.0% YoY). Furthermore, retail sales also retreated to its lowest level in 15 years (-90bps to 8.5% YoY).

 

Domestic Economy

Nigeria’s headline inflation continued its descent in the month of May to 11.61% YoY (April 18: 12.48% YoY), in line with our May forecast of 11.65% YoY (-4bps deviation). As in prior months, base effects, largely from the food basket, underpinned the moderation in inflation even as MoM headline reading advanced to 1.09% (+26bps from 0.83% in April). According to the NBS, average petrol price declined for the fourth consecutive month to N150.2/liter, after touching a 30-month high of N190/liter in January. However, 13 states recorded a slight increase in petrol price, with Borno recording the highest increase of N6.08 to N166.08/liter.

 

Equities

Following an impressive performance last week (5.03% WoW), the NGSE ASI sustained the gains this week, closing slightly higher by 0.67% WoW with YTD re-turn printing at 1.79%. This week’s gains reflected price positive performance in Seplat (+6.16%), Nestle (+3.09%), FBNH (+2.84%), Dangcem (+1.36%), and GTB (+0.85%).

 

Fixed Income Market

Yields in the Nigerian Fixed Income market bucked their upward trend as average yields dipped 51bps WoW to 12.83%. This was largely driven by sharp drop in treasury bill yields (-96bps WoW to 12.33%) which were submerged by elevated liquidity in the market. This came in despite higher stop rates (+30bps to 10.73%) at this week’s NTB auction where FG sold N180.9 billion worth of treasury bills which were in line with its planned offer. Furthermore, Bond yields also dipped 7bps WoW to 13.33%.


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The Week in Review:

 

GLOBAL

This week, the US central bank (FED) meeting delivered the expected 0.25% increase in its keep policy rate, the second move this year, taking the top-end of its target band to 2.0%. This was not a surprise as market had attached a ~90% probability to the rise in interest rates.

 

In Europe, the European Central Bank (ECB), at its policy meeting to-day, announced its intention to end its Quantitative Easing (QE) pro-gram in December and keep its three policy rates at current levels, at least through Q3 2019.


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DOMESTIC

Nigeria’s headline inflation continued its descent in the month of May to 11.61% YoY (April 18: 12.48% YoY), in line with our May forecast of 11.65% YoY (-4bps deviation).

 

According to the NBS, average petrol price declined for the fourth consecu-tive month to N150.2/liter, after touching a 30-month high of N190/liter in January. However, 13 states recorded a slight increase in petrol price, with Borno recording the highest increase of N6.08 to N166.08/liter.


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See: What To Expect From The Markets This Week - 180618

 

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EQUITIES

Following an impressive performance last week (5.03% WoW), the NGSE ASI sustained the gains this week, closing slightly higher by 0.67% WoW with YTD return printing at 1.79%.

 

This week’s gains reflected price positive performance in Seplat (+6.16%), Nestle (+3.09%), FBNH (+2.84%), Dangcem (+1.36%), and GTB (+0.85%).

 

See: Market Review and Round-Up of Corporate News Announced During The Week Ending 140618

 


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FIXED INCOME

Yields in the Nigerian Fixed Income market bucked their upward trend as av-erage yields dipped 51bps WoW to 12.83%.

 

This came in despite higher stop rates (+30bps to 10.73%) at this week’s NTB auction where FG sold N180.9 billion worth of treasury bills which were in line with its planned offer. Furthermore, Bond yields also dipped 7bps WoW to 13.33%.

 

See: Funding rates Crash below 5% as CBN Holds off on OMO ahead of Sallah Break

 

 

Author

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


Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.

 

 

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